The UK’s inheritance tax (IHT) rules are set to change, with significant implications for those looking to pass on their wealth. Since charitable gifts attract relief for IHT, many individuals are rewriting their wills to avoid unexpected large tax bills to secure their family’s financial future, whilst supporting causes they care about.
Rachel Reeves’ planned reforms will see retirement savings, which were previously exempt, become liable for a 40% inheritance tax charge from April 2027. This shift is expected to raise £1.5 billion per year by 2030, leaving many families facing higher tax bills and prompting individuals to rewrite their wills to find more tax-efficient solutions, such as charitable gifting.
This has led to a surge in estate planning, with people redrafting their wills to save hundreds of thousands of pounds in IHT while simultaneously supporting causes they care about. Since charitable gifts attract IHT relief, gifting to charity has become a powerful tool to reduce tax liability while leaving a lasting legacy.
Understanding the New Inheritance Tax Rules
For years, pension savings have been a reliable way to pass down wealth without incurring IHT. However, with the upcoming changes:
- Retirement pots will be subject to inheritance tax, affecting thousands of families.
- Beneficiaries of those who die before age 75 may face double taxation—both income tax and inheritance tax on the same funds.
- More estates will become taxable, increasing the need for careful inheritance tax planning.
How Charitable Giving Can Offer Tax Efficiency
Gifting is one of the most effective ways to reduce inheritance tax liability while making a meaningful impact. Here’s how:
1. Tax Benefits of Charitable Giving
One of the most powerful IHT planning strategies is to leave 10% or more of your estate to charity, which reduces the inheritance tax rate from 40% to 36% on the remaining taxable estate. This means:
- Your beneficiaries can still receive a substantial portion of your estate.
- Charities and communities benefit from a generous donation, supporting causes close to your heart.
Additionally, lifetime gifts—such as donating to charities during your lifetime—can be exempt from IHT, allowing you to see the impact of your giving while reducing your taxable estate.
2. Creating a Legacy Through Gifting
Philanthropic giving is not just about tax efficiency—it’s about creating a lasting legacy.
Many of Aberdeen and Banchory’s most beloved landmarks exist today thanks to the generosity of individuals who wanted to give back to their communities.
Crathes Castle, for example, was gifted to the National Trust for Scotland in 1951 by Sir James Burnett, 13th Baronet, ensuring its preservation for future generations. Similarly, Duthie Park, Johnston Gardens, and collections within Aberdeen Art Gallery stand as testaments to charitable giving, enriching the region’s cultural and natural heritage thanks to generous benefactors.
More recently, bachelor brothers Dan and William Davidson left a six-figure bequest to The Archie Foundation, supporting healthcare and bereavement services for families across North East Scotland. Similarly, Sheila Ferres MBE, the UK’s longest-serving physiotherapist, left almost £2 million to Aberdeen University’s Institute of Medical Science and bone research programme, ensuring advancements in medical research continue for generations.
By incorporating charitable giving into your estate planning, you can:
- Support your community long after you’re gone.
- Ensure your values live on through meaningful contributions.
- Help future generations benefit from your generosity.
3. Strengthening Communities Through Giving
Beyond personal legacy, charitable giving contributes to the wider community. Whether it’s funding healthcare initiatives, education programs, or local infrastructure, these gifts provide essential resources for North East Scotland.
At Burnett & Reid, we’ve been helping individuals and families in Aberdeen and Banchory structure their giving in tax-efficient ways for centuries. Whether you’re looking to establish a trust, rewrite your will, or explore gifting strategies, our experienced team can guide you through every step.
Plan Ahead with Expert Guidance
With inheritance tax changes on the horizon, now is the time to review your estate plan and explore tax-efficient gifting options. Burnett & Reid can help you:
- Minimise inheritance tax liability through strategic gifting and trusts.
- Ensure your wealth benefits your loved ones and the causes you care about.
- Navigate the legal complexities of estate planning with confidence.
Start planning today. Contact our expert Aberdeen and Banchory solicitors to discuss your inheritance tax strategy and secure your legacy for the future.
