Leaving at least 10% of the net estate to charity cuts the Inheritance Tax rate on the rest of the estate from 40.0% to 36.0%. The charitable gift itself is also exempt — so part of the cost is offset by the tax saving.
Worked example — £1,000,000 estate
| Scenario | Charity gift | Rate | IHT due |
|---|---|---|---|
| No charity gift | £0 | 40.0% | £270,000 |
| 10%+ to charity | £67,500 | 36.0% | £218,700 |
| Inheritance Tax saved | £51,300 |
| Step | Amount |
|---|---|
| Net estate | £1,000,000 |
| Less nil-rate band | −£325,000 |
| Less charity gift (exempt) | −£67,500 |
| Taxable estate | £607,500 |
| Rate | 36.0% (charity reduced rate) |
| Inheritance Tax due | £218,700 |
The “net estate” for the 10% test is the value after deducting the £325,000 nil-rate band (the HMRC “baseline amount”). Meet the 10% threshold and the reduced 36% rate applies to the whole chargeable estate.
The current UK Inheritance Tax rules
| Allowance / rate | Amount | Notes |
|---|---|---|
| Nil-rate band (NRB) | £325,000 | 0% on this slice of every estate |
| Residence nil-rate band (RNRB) | £175,000 | Only when a home passes to direct descendants |
| Taper threshold | £2,000,000 | RNRB falls £1 for every £2 of estate above this |
| Standard rate | 40.0% | On the estate above the available bands |
| Reduced charity rate | 36.0% | If ≥10% of the net estate goes to charity |
Sources & as-of
- Nil-rate band, residence nil-rate band, 40% / 36% rates, £2m taper: GOV.UK — Inheritance Tax.
- Bands frozen at these levels until 5 April 2030 (end of tax year 2029-30): GOV.UK — IHT nil-rate bands from 6 April 2028.
- Residence nil-rate band conditions & taper: GOV.UK — Residence nil-rate band.
- Gifts & 7-year taper relief: GOV.UK — Inheritance Tax: gifts.
- Data as-of 2026-06-18. This is a planning estimate, not tax advice — confirm your figures with HMRC or a qualified solicitor / financial adviser. Inheritance Tax applies UK-wide (there are no devolved IHT rates).