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Inheritance Tax at 36%: a £60,000 charity gift out of a £600,000 estate costs the family £27,400, not £60,000
Leave 10% of the net estate to charity and the Inheritance Tax rate drops from 40% to 36%. On a £600,000 estate a £60,000 gift costs the family £27,400.
A client with an estate of about £600,000, all going to two children, says they would like to leave something to the hospice that cared for their husband. A solicitor can say "it's tax-efficient" and leave it there. Clients usually want the number. This guide works one estate, and says what I did not read.
The rule on GOV.UK
The overview page gives the standard Inheritance Tax rate as 40%, charged on the part of the estate above the £325,000 threshold. It then says the estate can pay tax at a reduced rate of 36% on some assets "if you leave 10% or more of the net value" to charity in your will. Net value is the estate's total value less debts. Gifts to charity are themselves exempt.
One estate, with and without a gift
£600,000 net, no spouse exemption and no residence nil-rate band, to keep the test clean.
| No charity gift | £60,000 to charity | |
|---|---|---|
| Net estate | £600,000 | £600,000 |
| To charity (exempt) | £0 | £60,000 |
| Less threshold | £325,000 | £325,000 |
| Taxable | £275,000 | £215,000 |
| Rate | 40% | 36% |
| Tax | £110,000 | £77,400 |
| Children receive | £490,000 | £462,600 |
The charity gets £60,000 and the children get £27,400 less. Put plainly, every pound given costs the family about 45.7p. The tax saving of £32,600 is made up of £24,000 (40% of the £60,000 that left the taxable estate) and £8,600 (the rate falling from 40% to 36% on £215,000).
The part I did not read
GOV.UK's overview uses the words "net value". HMRC's own test for the reduced rate works on a "baseline amount", which I did not read on this page, and it gives a smaller figure than the net estate. So the minimum gift that qualifies may be lower than 10% of the estate. A gift of exactly 10% of the net value, as above, is the safe side of the line for this example, but read HMRC's full guidance before you quote a smaller one.
AI staff and workflows for high-street solicitors. Starting with conveyancing client updates.See what we would set upWhy the number is worth giving
Clients often assume a charity gift is either free or a full loss to the family. The table shows it is neither: the state shares in the cost through the lower rate and the exemption, so the family bears a little under half. Some clients will find that persuasive and others will not, and either way they decide with the figure in front of them rather than with a phrase.
What to ask the client
- Is the gift in the will, or planned as a lifetime gift? The page speaks of a will.
- Does a spouse or civil partner take everything first? Then the threshold arithmetic is different.
- Does the home go to the children? GOV.UK says the threshold can rise to £500,000 in that case, which changes the table.
- Will the charity name be right? A will naming a charity that has merged needs a check.
Where the client has no will at all, see what intestacy does to a £322,000 estate, and keep the family informed with a regular client update in the same tone.
Overlyft 
builds AI staff who join your private-client team and prepare the one-page "what the gift costs the family" sum from the client's own estate figures for a fee-earner to check before it goes out.
This is general information, not legal or tax advice. Check GOV.UK and HMRC's guidance before you advise.
Where this comes from: GOV.UK, "Inheritance Tax" overview (standard rate 40% above the £325,000 threshold; estates can pay a reduced rate of 36% on some assets where 10% or more of the net value is left to charity in the will; net value is the estate less debts). Read 11 October 2026.
AEO Lookup editorial team
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