“Giving is not about the redemption of the giver; it’s about the liberation of the receiver.” Robert Egger’s oft-quoted statement rings true in the modern age of philanthropy, as individuals across the wealth spectrum embrace giving as a meaningful part of their legacy and succession planning. However, when generosity crosses borders, are all charitable gifts equal?
From a UK tax perspective, gifts to charities are exempt from inheritance tax (IHT) and capital gains tax (CGT). In addition, broadly speaking, leaving at least 10% of one’s estate to charity allows the estate to benefit from a reduced IHT rate of 36%. This can make charitable giving attractive for both modest estates and those of high-net-worth families as part of the legacy is effectively paid by the reduction in IHT.
However, for a gift to qualify for exemption from UK IHT and CGT, the recipient must satisfy the statutory definition of a charity under section 23 of the Inheritance Tax Act 1984. UK registered charities meet this definition automatically. For a period, charities registered outside the UK could get relief, but this ended on 5 April 2024.
A gift to a non-UK charity will be treated as a chargeable transfer and may be subject to IHT at 40%. Direct testamentary gifts to overseas charities may also be subject to foreign tax, local regulatory requirements, and enhanced compliance procedures. Similar issues arise when there is a wish to gift non-UK assets to a UK-registered charity – great care is needed to understand how best to proceed.
These complexities can often be mitigated by structuring gifts in various ways, including through donor-advised funds or dual-qualified charities
Donor-advised funds (DAFs), in particular, can provide a flexible and tax-efficient structure for charitable giving by those resident in the UK to foreign causes. They allow UK resident donors to make contributions to a registered UK charity (known collectively as DAFs) and as part of that gift the donor recommends that the funds are used to benefit an overseas charity. Gifts to DAFs are fully exempt from inheritance tax (as they are gifts to a UK registered charity), and a UK charity is allowed to support foreign charitable works, and so can make the payments to a foreign charity on that basis. The works of the foreign registered charity do have to be considered charitable from a UK point of view also.
In summary, where charitable gifting has a UK nexus, care should be taken to ensure that the gift qualifies for available tax exemptions and with minimal regulatory burden. Professional advice should be sought to ensure that the gift is structured appropriately and that tax efficiencies are secured in the recipient jurisdiction, the jurisdiction where the assets are located and in the country of the donor’s residence.
January 21, 2026
By Lu Alaimo, Russell-Cooke, London (United Kingdom)
