Families saved £1.28bn in IHT last year by leaving gifts to charities in their wills as more people used charitable legacies to reduce the tax burden on their estates.
The amount of IHT saved through charitable gifts in wills has climbed 88% over the last five years, from £680m to £1.28bn.
Gifts to charity are exempt from IHT. In addition, where 10% or more of an estate is left to charity the remaining taxable estate benefits from a reduced IHT rate of 36%, compared with the standard 40%.
HMRC figures show the reduced-rate relief saved estates £55m in IHT last year. Surrey-based law firm TWM Solicitors reckons that there is not widespread knowledge about this particular rule.
Gillian Dunlea, managing associate at TWM Solicitors, a private wealth and family law firm, said: “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.”
She said there is still scope for more people to donate enough of their estate to benefit from the reduced 36% rate of IHT. “It is a valuable tax incentive, but one that is not particularly well known and, in light of proposed changes in inheritance tax, needs careful structuring.”
Inheritance Tax (IHT) receipts in July totalled £868m, up £26m compared to the £844m recorded in July 2025, according to figures released by HMRC. Over the last quarter IHT receipts for April to July were £3.2bn, £0.1bn higher than the same period last year. IHT receipts have climbed to record highs for five consecutive record years, reaching £8.5bn in 2025/26.