Supporting a charity could give you that feel-good factor and provide a sense of purpose. When you’re looking at the benefits from a tax perspective, it might make financial sense in some circumstances too.
Indeed, according to a June 2025 article published by Professional Adviser, more people are leaving a charitable legacy in their will as a way to reduce a potential Inheritance Tax (IHT) bill.
The first step to making your charitable efforts tax-efficient is to make them part of your financial plan. By viewing donations alongside your other priorities, you may be able to work with your financial planner to find the most tax-efficient ways of supporting the causes that are important to you.
Read on to find out why naming a charity as a beneficiary in your will might form part of your estate plan.
1. Claim tax relief through Gift Aid
If you’re a taxpayer, one of the simplest ways to donate to charities tax-efficiently is to use Gift Aid.
By making a Gift Aid declaration, the charity you support can reclaim the basic rate of Income Tax you’ve already paid. As a result, if you donate £100 to a charity, the organisation will benefit from a £125 boost.
In addition, if you’re a higher- or additional-rate taxpayer, you can claim the difference by completing a self-assessment tax return. So, if you pay Income Tax at 40%, you can claim back 25p in tax relief for every £1 you donate.
2. Make donations from your income
Some employers allow you to make regular donations directly from your income through a Payroll Giving scheme.
The donation would be made from your gross salary, before your taxes and other deductions are made, which can make it tax-efficient. Similar to Gift Aid, it’s an option that could increase your charitable support and make sense from a personal tax perspective. For example, you might make donations from your income to avoid moving into a higher tax bracket and potentially losing other tax breaks.
3. Donate land, property, or shares
When disposing of certain assets, including investments and property that isn’t your main home, you’ll typically be liable for Capital Gains Tax (CGT) if the profits exceed £3,000 in the 2025/26 tax year.
However, you may receive CGT relief if you donate land, property, or shares to a charity. When making this type of donation, a charity may ask you to sell the gift on its behalf, and you can still claim tax relief on this donation.
Be sure to keep an accurate record of the donations, including any requests from charities to sell the assets on their behalf.
4. Leave a charitable legacy in your will
Leaving a charitable legacy in your will could reduce the rate of IHT your estate pays.
In 2025/26, the nil-rate band is £325,000. If the value of all your assets, known as your “estate”, is below this threshold, no IHT is due. If the value of your estate exceeds the nil-rate band, IHT could be due, but there are often other allowances and steps you could take to mitigate a potential IHT bill.
An estate plan could help you understand if your estate could be liable for IHT.
The standard rate of IHT is 40%. However, if you leave at least 10% of your estate to charitable causes when you pass away, the rate falls to 36%.
So, for some estates, leaving money to charity could be a win-win – your beneficiaries might inherit more while also supporting a good cause.
As assets left to charities aren’t liable for IHT, you might also leave assets to them in your will to bring the value of your estate under the IHT threshold.
Contact us to talk about your charitable giving
There are many reasons why you might want to make charitable giving a priority when creating a financial plan. If you’re keen to support good causes now or in the future, we could work with you to understand how you might do so tax-efficiently.
Please get in touch to arrange a meeting.
Please note:
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
The Financial Conduct Authority does not regulate estate planning, Inheritance Tax planning, or will writing.