Inheritance tax changes will lead to charitable legacies boost, experts predict

Changes to inheritance tax will help to boost the number of people leaving a gift to charity in their will, according to six in ten professional advisers.

In last year’s Autumn Budget Chancellor of the Exchequer Rachel Reeves announced that inheritance tax thresholds will be frozen until 2030 and from April 2027 pension wealth would no longer be exempt.

It is estimated that the proportion of estates facing an inheritance tax bill will almost double over the next five years because of the change, which increases the scope for estates to benefit from charitable gift exemptions. Estates where 10% or more of their net value is donated to charity receive a reduced rate of 36%.

According to a survey of professional tax advisers carried out by charity consortium Remember A Charity 62% also believed more people will consider leaving a gift to charity due to the changes. And a similar proportion say they are already receiving more requests for advice on charitable legacy gifting.

In addition, the survey found that just under two in three advisers believe charitable tax incentives will become even more important to their client base.

“Professional advisers can have a profound impact on clients’ decision-making,” said Remember A Charity director Lucinda Frostick.

“While talking philanthropy isn’t always their comfort zone, fiscal incentives are – forming a natural starting point for approaching charitable giving.

“Even though the reasons for giving extend far beyond tax incentives, these IHT changes make the legacy conversation more relevant to a wider group.

“They present an ideal opportunity for advisers to raise the topic, building understanding of legacy giving and inspiring more clients to support the causes they care about.”

Tanya Watson, a chartered tax adviser and senior director at Alvarez & Marsal Tax LLP, added: “The changes to IHT are prompting a fundamental reassessment of estate planning strategies, particularly among clients who may not have previously been impacted.

“What we’re seeing is a growing need for tailored advice that balances financial objectives with personal values.

“Charitable giving can be a highly effective planning tool, and these changes provide a timely reason for advisers to revisit legacy plans with clients who may not have considered this route before.”