Should you leave 10% of your estate to charity to cut the IHT rate?
Leaving at least 10% of the baseline amount of an estate component to charity reduces the Inheritance Tax rate on that component from 40% to 36%. Because the charitable gift is itself exempt and the rate falls on everything else, beneficiaries give up considerably less than the gift is worth.
- The test: at least 10% of the baseline amount of the relevant component left to charity.
- The reward: 36% instead of 40% on the rest of that component.
- The baseline: the component's value after exemptions, reliefs and the nil-rate band.
- The cliff: just under 10% gets no reduction at all, which makes precision worth paying for.
01 How the reduced rate works
Where at least 10% of the baseline amount of a component of the estate is left to charity, the rest of that component is charged at 36% rather than 40%. The charitable gift is itself exempt, so it bears no tax at all.
The baseline amount is not the whole estate. It is the value of the component after deducting available reliefs, exemptions and the nil-rate band — so 10% of the baseline is usually a much smaller figure than 10% of the estate.
Estates are divided into components for this purpose — broadly the survivorship property, settled property and the general estate — and the test is applied to each. That is a complication for larger estates and irrelevant for most.
02 What it actually costs the family
The gift is exempt and the rate falls on the rest, so the two effects offset each other substantially. On an estate where the reduced rate applies, beneficiaries typically give up something in the region of half the value of the charitable gift rather than all of it.
That is the honest way to present it. Leaving money to charity still costs the beneficiaries money — it is not free — but the cost is around half what the same gift would be without the relief.
Where the estate was going to make a charitable gift anyway, sizing it to reach the 10% threshold is straightforwardly worth doing, because the marginal pounds that take it over the line are close to costless.
Shows: what beneficiaries receive with and without a charitable gift large enough to trigger the reduced rate. Ignores: the division of the estate into components, reliefs, and the exact baseline calculation.
On the defaults above, the worked example shows £288,000. The gift meets the 10% test, so the rest is taxed at 36%. Beneficiaries receive £12,000 less than without the gift — about half its value.
Source: Inheritance Tax
03 The cliff edge, and how to draft for it
Falling just under 10% gets no reduction at all, and the difference between 9.9% and 10% is worth several percentage points of tax on the whole component. That makes precision valuable and a fixed cash legacy dangerous, because estate values move.
The standard drafting response is a formula clause: a gift expressed as whatever amount is needed to meet the 10% test at the date of death, rather than a fixed sum. That keeps the estate on the right side of the line whatever it turns out to be worth.
It is one of the narrow cases where the wording of a will genuinely changes the tax outcome, and it is worth a solicitor rather than a template — as is the interaction with the bands that reduce the baseline in the first place.
Source: Wills, probate and inheritance
The interesting thing about this relief is what it does to the cost of giving. Because the gift is exempt and the rate falls on everything else, beneficiaries give up roughly half the value of the charitable legacy rather than all of it — so an estate that was going to give something anyway should size the gift to clear 10% exactly. The trap is the cliff: 9.9% gets nothing. Do not put a fixed cash figure in the will, because estate values move; use a formula clause that gives whatever is needed to meet the test on the day.
FAQ
Is it 10% of my whole estate?
No — 10% of the baseline amount of the relevant component, which is its value after reliefs, exemptions and the nil-rate band. That is usually a much smaller figure than 10% of the estate.
What does the gift cost my beneficiaries?
Around half its value where the reduced rate applies, because the gift is exempt and the rate on everything else falls from 40% to 36%. It still costs them something; it costs about half what it would without the relief.
How should the gift be worded in my will?
As a formula rather than a fixed sum — an amount sufficient to meet the 10% test at the date of death. Estate values move, and falling just under 10% forfeits the reduction on the whole component.
Sources
Regulator references
- Inheritance Tax reduced rate for charitable giving · GOV.UK · 2026The 10% test and the reduced 36% rate it produces.Last verified: 2026-09-07
- Inheritance Tax · GOV.UK · 2025The nil-rate band, the 40% rate and what forms part of the estate.Last verified: 2026-09-07
- Wills, probate and inheritance · GOV.UK · 2025The intestacy rules that apply when no valid will exists.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.