Families saved £1.28bn in inheritance tax last year by leaving money to charity

People are leaving bigger gifts to charity in their wills to cut their inheritance tax (IHT) bill as well as for personal or philanthropic reasons, according to a law firm.The amount saved on IHT by leaving money to charity has soared 88 per cent to an annual £1.28billion over the past six years, according to government figures published earlier this year analysed by TWM Solicitors. Money left to charity is not liable for IHT, and you can cut the overall rate from 40 per cent to 36 per cent if you give a big enough chunk of your estate to good causes.You need to bequeath at least a tenth of your net estate – the part liable for IHT – to charity in your will to get the discount.Around 4-5 per cent of estates currently pay death duties, and this is expected to rise to 7 per cent once unspent pensions are included in assets liable for IHT starting from April 2027. Helping good causes: Money left to charity is not liable for inheritance taxIHT is levied at 40 per cent above thresholds which start at £325,000 per person, or £500,000 if you leave a home to direct descendants. Couples can double those thresholds, because spouses are exempt from IHT.TWM says in 2025-26 tax year £1.22billion was saved on gifts left to charities and property held in trust for charitable reasons, while a further £55million was saved via the rate reduction to 36 per cent.Gillian Dunlea, managing associate at the law firm, says: 'Some people are understandably concerned about the level of inheritance tax payable on their estates, and charitable giving can appeal because gifts to charity are free from IHT.'With pensions being subject to IHT from 2027, pensions may become less tax efficient for families to inherit, so clients should review their pension nominations alongside their wills, particularly where they intend to make charitable gifts as part of overall estate planning.'Dunlea adds: 'Many people prefer to leave charitable gifts in their will rather than during their lifetime where they are concerned about future care costs or retaining enough income in later life.''Gifting to charities through wills may also have risen as, increasingly, beneficiaries – generally children or even grandchildren – are grown up and already financially independent.'Ian Dyall, head of estate planning at wealth management firm Evelyn Partners, says: 'If you are already making significant gifts to charity in your will it is probably worth checking whether they will qualify for the reduced 36 per cent inheritance tax rate.'In some cases, a small increase in the gift to charity will mean that both the charity and your beneficiaries inherit more, because the reduction in inheritance tax more than covers the additional amount gifted to charity.'We have even done this following a person’s death using a deed of variation to amend the original charitable gift.'Dyall goes on: 'If you do wish to make a gift to charity then you need to decide whether it is better to make that gift during life or via your will on death.'Gifts during lifetime benefit from Gift Aid which can help reduce your income tax liability, whereas significant gifts via your will can help secure the reduced inheritance tax rate on all the assets in your estate.' Leaving money to charity in your will Are YOU leaving money to charity to cut your inheritance tax bill? Tell This is Money about your plans to reduce inheritance tax for your loved ones. Or are you someone who has been cut out of a will with money left to charity instead? Write to editor@thisismoney.co.uk and put INHERITANCE TAX in the subject line. If you are leaving money to charity in your will to avoid IHT it is best to get legal and financial advice to ensure this is structured properly and in line with your wishes.Regarding bequests to good causes in general, you should beware fake charity will schemes run by fraudsters.MoneyHelper, the government-backed and impartial money website, says: 'This is when scammers pretend to be from a charity and offer a free or discounted will-writing service.'The aim is usually to pressure you into leaving money to their fake charity, steal your personal and financial details, or charge hidden fees.'Sometimes the "charity" doesn't exist at all, or the will they create isn't legally valid.'MoneyHelper explains how to protect yourself, adding: 'Many charities run genuine, free will schemes, so it's worth checking directly with a charity you trust if you're interested.'It is always best to make a will to ensure your assets are distributed as you would like, rather than according to the rules of intestacy which apply otherwise.Solicitors are trained to draw up wills correctly, and are regulated by the Solicitors Regulation Authority so you have protection if things go wrong.Will writing services are typically cheaper than solicitors. 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