New Restrictions to Charitable Giving: What You Need to Know

Changes to UK tax law regarding charitable giving took effect from 6 April 2026. Following legislative amendments in the Finance Act 2025-26, the generous tax exemptions associated with charitable gifts - specifically Inheritance Tax (IHT) exemptions - will be restricted to gifts to UK-registered charities.

This means gifts made to non-UK charities or to unregistered charitable trusts will generally no longer qualify for 100% IHT exemption on death, even if they have exclusively charitable purposes under the law.

The New Legal Landscape

For deaths occurring on or after 6 April 2026, the IHT exemption under Section 23 of the Inheritance Tax Act 1984 will be strictly limited to charities registered with the Charity Commission (or equivalent UK regulatory bodies).

This impacts Will-makers who have included gifts in Wills on trust for general "charitable purposes" at the discretion of Trustees. Previously, such arrangements were often used to provide flexibility, allowing Trustees to select beneficiaries at a later date. Under the new rules, this approach poses a high risk of compromising IHT relief.

For lifetime donations, these restrictions took effect from 26 November 2025.

What You Need To Do

To ensure that legacies remain tax-efficient, it is critical that proactive steps are taken:

1. Review Wills Immediately: If your Will leaves a legacy to a Trust for "charitable purposes" or to a discretionary trust that might benefit non-UK charities, it should be reviewed.

2. Letters of Wishes: Letters of wishes for Wills should be reviewed as gifts may fail to qualify for IHT exemption if they are not specifically directed to UK-registered charities or if the selection by the Trustees is not finalised within two years of death.

3. Name Specific Charities: Amend Wills to name specific UK-registered charities to ensure the 100% IHT exemption applies.

4. Appoint Trusted Executors: Ensure Executors/Trustees are aware of the need to distribute funds to qualifying UK charities within two years of death to secure the exemption.

5. Register Existing Trusts: If a Will creates a charitable trust, ensure that the trust is registered as a UK charity as expediently as may be possible.

Further Information

As these changes represent a "hidden" IHT trap, reviewing estate planning documents now is essential. For further information on Wills and charitable gifting, please contact the Wills, Trusts & Probate and Charities and Social Enterprise teams of Leathes Prior Solicitors on 01603 610911.