Changes to Inheritance Tax (IHT) relief on charitable gifts

This change was introduced under the 2025 Autumn Budget – including restricting charity exemptions to direct gifts to UK charities and clubs. The new rules apply to deaths occurring on or after 6 April 2026, and for lifetime transfers, the new rules took effect from 26 November 2025.

Whilst outright gifts in a Will to UK registered charities will continue to qualify for 100% IHT relief, there will be many testators who have chosen to leave property to their executors/trustees to be held on general charitable purposes in such shares as they shall decide.  This can be preferable where the testator wishes to benefit multiple charities and would like the flexibility to amend their wishes via a Letter of Wishes, rather than a Codicil to their Will, or, they might consider establishing a charitable trust under the terms of their Will.

Such gifts will now no longer automatically qualify for IHT relief unless the executors/trustees distribute the gift to a UK charity or charities within two years of death.  However, if this was not actioned by way of a deed of appointment before interest starts arising six months following death on the IHT that would otherwise be payable, this may result in the executors paying a substantial IHT bill in order to progress the administration of the estate, and then reclaiming the IHT at a later stage, causing cash flow issues and administration costs.  Furthermore, many executors/trustees may not be aware of the two-year window within which the abovementioned deed of appointment needs to be completed for IHT relief to apply, and the potential IHT exemption could be lost altogether.

If you have a Will that establishes a trust for general charitable purposes, we recommend that you consider the following:

• updating your Will and/or Letter of Wishes, for example:
  • • to name specified UK charities;
    • include a time limit for your executors/trustees to make a selection if they have discretion;
    • alert your executors/trustees to the potential problem; and/or
    • making gifts conditional on the named charity qualifying as a charity for UK tax purposes; or
• setting up a UK charity during your lifetime and registering it with the Charity Commission, so that this charity can be named in your Will; or
• the use of donor advised funds for the receipt of charitable legacies.

Please contact your usual a member of the Private Client Team or your usual Wedlake Bell adviser to discuss the options further.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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