Are clients leaving money to charity to beat IHT?

The overwhelming majority of my clients have no intention of leaving money to charity for the purpose of mitigating inheritance tax. The clients I advise have worked hard, saved diligently, and built their wealth over a lifetime. Those without children are, quite rightly, planning to enjoy their money during their lifetime. They want to travel, maintain their standard of living, and spend what they have earned. From a technical standpoint, leaving 10% or more of the net estate to charity reduces the IHT rate from 40% to 36%. That is a useful planning tool in the right circumstances, but it is only effective where the client has a genuine charitable intent. The more relevant question for most clients, particularly since the announcement that pensions will fall within the IHT estate from April 2027, is how to structure their affairs so that wealth passes efficiently to the people they actually want to benefit.

We do philanthropy work for some of our clients. We are also involved with DB SSAS schemes which generally allow clients to save more due to a different way of calculating the annual allowance. In a DB scheme, funds left on the last director death will be resent back to the sponsoring company. We have seen more clients willing to gift pension funds to charities before dying.

Most parents willing to do it are fearing that a massive inheritance is a "curse" that reduces motivation and that money will be used irresponsibly, ruining their children's ambition, drive, and work ethic. Some others feel their children are already secured and do not need an inheritance, and it will be more impactful to donate to philanthropic causes. They wish to create a lasting, meaningful legacy by supporting charities, sometimes leaving money to charities as a way to encourage societal good. They want their children to get involved too into their philanthropic causes so they keep their work drive andethic.

Where clients are already planning to leave money to charity in their wills, the 10% threshold often becomes part of the conversation. For example, if someone had intended to give 5%, learning about the reduced inheritance tax rate can prompt them to consider increasing that gift. In some cases, it can be financially sensible to do so, as the overall amount left to other beneficiaries may actually be higher than it would have been with a smaller charitable donation. That said, it’s essential to run the numbers carefully to understand the full financial impact.

For others, the topic tends to arise more out of curiosity. However, whenever inheritance tax planning is discussed, we make sure this option is clearly explained so clients understand the full range of possibilities and their implications.

In practice, I haven’t seen this rule drive charitable giving on its own—it’s more often a consideration for those who already have philanthropy in mind.

I am seeing more clients raise charitable giving in IHT conversations, but I would be very careful about presenting it as a tax play first and a legacy decision second. Leaving pension or estate assets to charity can be effective in the right circumstances, but only where there is genuine intent behind it. If the objective is purely to mitigate IHT, there are often stronger and more balanced solutions to consider first, including whole of life policies written in trust, lifetime gifting and proper estate structuring. For many families, whole of life cover is particularly powerful because it can create immediate liquidity to meet the IHT bill without forcing the sale of property or investments. The best planning is not about giving money away for the sake of tax, it is about protecting family wealth, preserving choice and aligning the strategy with the client’s real wishes.
Tax efficiency should support the plan, not become the plan itself.

The increase is partly a response to the IHT changes on pensions from April 2027, which have now received Royal Assent. For some clients, leaving pension funds to charity can be a tax-efficient way to avoid a significant IHT charge while supporting causes they care about. However, this shouldn’t be driven purely by tax. Giving assets away simply to save tax means your family receives nothing, so it must reflect genuine intentions.

There are often more balanced options. Using annual gifting allowances or making gifts out of excess income remains one of the most effective and underused IHT planning tools, particularly for higher net worth clients. Trusts can also play a role, and life insurance can be used to cover an IHT liability. These approaches can reduce an estate over time in a tax-efficient way while still allowing clients to support both their family and chosen causes.

We are seeing more clients consider charitable gifts from pensions, particularly where IHT exposure feels punitive. It is a rational response to an increasingly uncertain regime - when rules shift, behaviour follows.
What this represents, however, is optimisation wearing philanthropy’s clothing, rather than a proactive intergenerational strategy.
If anything, this trend marks a rare unintended positive consequence of recent pension changes: more capital flowing to good causes. Yet it also highlights a deeper issue. When long-term savings policy becomes unpredictable, clients are pushed into trade-offs they never expected to make.
Over time, the erosion of certainty is likely to do more damage than the tax itself.