UK law rewards charitable legacies with a significant Inheritance Tax discount. If 10% or more of your net estate passes to registered charities, the IHT rate on the rest of your taxable estate drops from 40% to 36%. This calculator shows the IHT saving, the true net cost to your family, and whether you are close to the magic 10% tipping point.
Charitable Legacy IHT Calculator
Frequently Asked Questions
How does leaving money to charity reduce IHT?
If you leave at least 10% of your net estate (estate value minus nil-rate bands) to registered charities, the IHT rate on the remainder of your taxable estate falls from 40% to 36%. This reduced rate can save your estate thousands of pounds, partially offsetting the charitable gift.
What is the 10% charitable legacy threshold based on?
The threshold is based on your \u2018baseline amount\u2019 \u2014 broadly your net estate value after subtracting the nil-rate band (\u00a3325,000) and residence nil-rate band (up to \u00a3175,000 if applicable), but before the charitable deduction. Your charitable legacy must be at least 10% of this baseline amount to qualify for the reduced 36% rate.
What is the tipping point for charitable legacies?
There is a well-known tipping point: if your estate is close to the 10% threshold, leaving a slightly larger amount to charity can reduce the IHT bill by more than the extra gift costs. At exactly the tipping point, giving more to charity costs your family nothing because IHT savings exactly cancel out the extra gift.
Can I merge my estate with my spouse\u2019s for the 10% test?
Yes. Married couples and civil partners can elect to merge their estates for the purpose of the 10% test. This can be advantageous if one estate has a larger charitable legacy and could benefit the other. A deed of variation can also redirect legacies after death.
Does a legacy to charity always avoid IHT?
Yes, the charitable legacy itself is always free of IHT regardless of size \u2014 any gift to a registered UK charity is exempt. The 10% rule is an additional bonus: it reduces the rate on the rest of your taxable estate from 40% to 36%. So you get two benefits: the gift itself is IHT-free, plus the reduced rate if you meet the threshold.