The 2025 Autumn Budget introduced important changes to inheritance tax (IHT) relief for charitable gifts that will affect how individuals structure their testamentary charitable giving.
Direct gifts to UK registered charities will continue to qualify for 100% IHT exemption. However, the exemption will no longer apply if property is given to be held on trust for charitable purposes, unless the recipient trust is, broadly, itself registered as a UK charity. This means that unregistered charitable trusts, even those with genuine charitable purposes, will no longer benefit from the IHT exemption.
For deaths occurring on or after 6 April 2026, the new rules will apply. For lifetime transfers, the changes took effect from 26 November 2025.
The changes are likely to affect scenarios where a testator leaves a gift in their Will on trust for charitable purposes at the discretion of the trustees, rather than directly to qualifying charities. This is common where the testator wishes to benefit multiple charities and have the flexibility to amend their wishes, via a letter of wishes, without needing to update their Will.
To claim the IHT exemption (depending on the terms of the Will) executors will likely need to take one of the following steps:
- distribute the gift directly to one or more qualifying charities within two years of death; or
- ensure the trust created by the Will meets the relevant conditions.
The changes have the potential to catch out individuals who have already structured their Wills based on the current rules and may not be aware of the changes. The Government's policy paper states that they expect fewer than 50 individuals may need to restructure their charitable giving. However, based on our experience, we would expect this number to be significantly higher.
If your Will includes a charitable legacy, we would recommend revisiting it (and any accompanying letter of wishes) to check whether these changes impact the availability of the charity exemption. Where they do, it will be important to ensure your trustees and executors are aware of the impact of the rules and the options available to them to ensure the exemption applies.