A recent but relatively understated change to inheritance tax legislation highlights the need for greater precision in Will drafting, particularly where charitable gifts are concerned.
By way of background, section 23 of the Inheritance Tax Act 1984 allows many gifts to charity to pass free of inheritance tax. Until recently, this relief was applied quite broadly. It was enough for money to be set aside for charitable purposes, even if no specific charity had been named at the time of death. This meant that more general wording in Wills could still work effectively. For example, gifts “to such charities as my executors shall choose” or “to any charity in the Camden area” were commonly used and typically still qualified for the tax exemption.
The Finance Act 2026 has narrowed that position. It removes the broader approach that previously allowed assets set aside for general charitable purposes to qualify for the exemption. The likely effect of the new legislation is that inheritance tax relief will now apply only where money or property passes to clearly identifiable charities, rather than simply being set aside for charitable use in a general or unspecified way.
The practical impact is significant. Broadly drafted charitable clauses, which previously operated without difficulty, may now create uncertainty. Where no charity is clearly identified there is potentially an unexpected IHT liability.
In practice, there may be some flexibility. Executors will have up to two years from the date of death to arrange post-death variations or otherwise structure the position in a way that preserves relief, although this will depend on the specific facts. More tax may also be payable at the point of the application for probate, with a requirement to reclaim later.
This highlights the importance of careful, up-to-date drafting to ensure both tax efficiency and that the testator’s wishes are carried out as intended. Clearly identifying the chosen charities is essential.
Taking the time to review charitable provisions – and seeking expert advice on will drafting – can help ensure that both the intended legacy and the available inheritance tax relief are properly protected.
Article by Toby Weiniger