News & Blog

EU charity tax relief gift warning for estates

27th September 2023

Leaving money to an EU-based charity will soon lose its tax-free status thanks to changes made to inheritance tax rules in March.

It is not uncommon for people to bequeath part of their wealth to charitable causes after they die. Up until this year such gifts have incurred no inheritance tax liabilities and are often seen as a positive way to give out wealth to those who might most need it.

Nevertheless, in the Government’s Budget in March, part of the fresh rules included a tweak to the relief on charitable gifts, which means that the tax relief would only be available to UK-based charities.

The change to the rules immediately impacted foreign charities. However, there is a transition period in place for EU-based charities until April 2024.

After that point any charity that is not based in the UK, including EU charities, will no longer be able to claim charitable tax relief on donations. Any estate bequeathing to a non-UK charity will lose the inheritance tax relief previously available.

How does charitable tax relief work?

Currently you can bequeath an unlimited amount of money to charity in your will and incur no inheritance tax (IHT) liabilities.

If you gift 10% or more of your estate to charity it reduces your IHT rate from a 40% charge on wealth over the nil rate band to 36%. It is one of many measures that are effective in reducing the overall potential IHT bill when you die.

With more estates moving into IHT liability, particularly with the bands frozen for more than a decade, this is no inconsiderable way to mitigate some of the potential liability.

What does the tax relief change mean?

Mitigating IHT through charitable donations is still a viable way of reducing your eventual IHT liability. However, the caveat is now that this will only apply to UK-based charitable donations from April 2024.

It is an incredibly tough decision to make, but if a non-UK charity is currently named as a beneficiary of your estate in your will, then this could have significant implications for the eventual tax bill to be paid by your estate.

If the charity you have in mind has UK-based entities, then ensuring you specify it will go to that branch will still be an effective strategy. However, outside of the UK, the same no longer applies.

This could also have an effect on British expats based in the EU with charitable giving in mind, as they could be caught out gifting to charities where they live abroad too.

If you have a nominated charity in your will that isn’t UK-based and would like to discuss your options, or for any other questions around inheritance tax planning and how charitable giving relief works, don’t hesitate to get in touch.

Call us and one of our team will be happy to help or arrange a call back
Meet Our Team

Speak to a practical and experienced financial advisor

Get in touch with a member of our team

Meet Our Team
Get in Touch

Find out more about our range of service.

For further details please contact us.

Get in Touch
Visit Us

We have locations in both London and the North East

Newcastle | Richmond | Northallerton | London | Swanley | Hertfordshire | Camberley

Visit Us

Regulatory Statement

Gale and Phillipson Investment Services Ltd, Gale and Phillipson Advisory Services Ltd, Gale and Phillipson General Financial Services Ltd and Gale and Phillipson (SE London) Ltd are all authorised and regulated by the Financial Conduct Authority (Reference Numbers 431387, 142752, 195080, 195522).  Gale and Phillipson (Herts) Ltd and Gale and Phillipson Consulting Ltd are appointed representatives of Gale and Phillipson Advisory Services Ltd.  Gale and Phillipson (Surrey) Ltd is an appointed representative of Gale and Phillipson Investment Services Ltd. (Reference Numbers 615821, 811525, 703337). All companies trade under the name Gale and Phillipson and are registered in England and Wales numbers 05409822, 02232959, 03751076, 04077157, 08864945 and 04823391.  Registered office for all companies is Gallowfields House, Fairfield Way, Richmond, DL10 4TB.