Leaving Money to Charity in Your Will

When leaving a gift to charity, name the organisation exactly as it is registered, and include its registered charity number, since charity names can be similar and numbers avoid any ambiguity about which organisation you mean. This is particularly important for smaller or local charities.

You can leave a fixed sum of money, a specific item, or a percentage share of your residuary estate to charity. Leaving a percentage of the residue rather than a fixed sum has the advantage of automatically adjusting in line with the value of your estate over time.

Gifts left to charities registered in the UK are exempt from inheritance tax, meaning the full value of the gift passes to the charity without reducing the estate through tax first. This exemption applies regardless of the size of the gift.

Because charitable gifts reduce the taxable value of the estate, they can also reduce the amount of inheritance tax payable on the rest of the estate that passes to other beneficiaries.

There is a further incentive built into the inheritance tax rules. If you leave 10% or more of the baseline amount of your estate to charity, the rate of inheritance tax charged on the remainder of your taxable estate is reduced from 40% to 36%.

The baseline amount is broadly the value of the estate after deducting debts, reliefs, exemptions and the available nil rate bands, so working out whether a gift meets the 10% threshold usually requires a proper calculation, which an accountant or solicitor can help with if the estate is likely to be taxable.

There is no need to choose between leaving money to charity and leaving money to family or friends. Many wills include a charitable legacy alongside gifts to loved ones, either as a fixed sum, a specific item, or a percentage of the residue.

If tax efficiency and supporting a cause both matter to you, it is worth discussing the potential for the 36% reduced rate with a professional adviser, particularly for larger estates where the saving could be significant.

A common mistake is naming a charity informally, for example by a shortened or popular name, rather than its full registered name and charity number, which can cause delay if the executor cannot confirm exactly which organisation was intended, particularly where a charity has merged or changed its name.

Another mistake is leaving a fixed cash sum to charity in a will written many years earlier without reviewing it, so the gift becomes disproportionately small, or large, compared with the eventual size of the estate. Leaving a percentage of the residue avoids this problem, since it automatically scales with the estate's value.