The benefits of charitable giving as part of your financial plan

Charitable giving might be something you already do, but does it form part of your wider financial plan? It could present opportunities to align your financial goals with your values and reduce your tax bill.

Whether you’re interested in making one-off or regular donations, you could benefit from considering charitable causes alongside wider financial decisions. 

Please note: HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen. 

Taxation planning and estate planning are not regulated by the Financial Conduct Authority.

1. Aligning your financial decisions with your values could maximise the impact

If you currently separate your financial decisions and your values, your financial plan could help you bring them together. That might include setting a portion of your income or assets aside for donations or weighing up whether impact investing, which aims to deliver measurable positive outcomes, could be right for you. 

Taking a strategic approach to charitable giving could maximise the impact your support has. For example, using Gift Aid could boost your donations by 25%, or you might assess which causes could deliver long-term benefits to your community. 

Please note: The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

Past performance is not a reliable indicator of future performance and should not be relied upon.

2. Charitable giving could create a lasting legacy

Many people consider the legacy they want to leave behind when they die, and the positive impact they’ve had on the world may play an important role in that.

Indeed, when Dolly Parton sadly passed away in August 2026, her philanthropy was celebrated alongside her musical achievements. Her BBC (25 August 2026) obituary noted how her efforts:

• Helped remove the bald eagle from the endangered species list
• Gave millions of free books to children through the Imagination Library
• Funded college scholarships and hospitals through the Dollywood Foundation. 

Charitable giving during your lifetime or after your death could help establish a legacy that reflects what’s important to you.

3. Donating some of your salary could be tax-efficient

In some circumstances, gifting to charities could help you manage your personal tax.

For example, you might want to keep your income below £100,000 to avoid falling into the “60% tax trap”. Your tax-free Personal Allowance (£12,570 in 2026/27) is reduced by £1 for every £2 your income exceeds £100,000. This leads to an effective 60% tax rate on the portion of your income between £100,000 and £125,140. In addition, some workers may also lose their entitlement to free childcare if their income exceeds £100,000. 

So, some individuals could find that making charitable donations from their salary is efficient from a tax perspective. 

Rules and exemptions around tax can be complex, and it’s important to understand the long-term implications of gifting. We could help you assess your options and what may be suitable for your goals and circumstances. 

4. Charitable giving could form part of your estate’s Inheritance Tax strategy

If your estate could be liable for Inheritance Tax (IHT) when you pass away, charitable giving could help reduce the potential bill while supporting causes that matter to you. 

Two important thresholds to consider when assessing your estate’s IHT liability are:

1. Nil-rate band: In 2026/27, this is £325,000. If the value of your estate falls below this threshold, no IHT will usually be due.
2. Residence nil-rate band: If you leave your main home to a direct descendant, you may also be able to use the residence nil-rate band, which is up to £175,000 in 2026/27. You should note that the residence nil-rate band will fall by £1 for every £2 the value of your estate exceeds £2 million.

If you’re married or in a civil partnership, you may be able to pass on unused nil-rate bands to your partner. In effect, this means couples could pass on up to £1 million to loved ones before IHT may become payable. 

If your estate is liable for IHT, the standard rate of 40% may be applied to the portion of your estate that exceeds the thresholds. 

Gifts left to charities when you pass away, either through your will or a pension expression of wish form, are generally exempt from IHT. As a result, charitable gifts could reduce the value of your estate that is subject to IHT.

In addition, if you leave more than 10% of your net estate to charitable causes on death, your estate may qualify for the reduced 36% IHT rate.

There may be other IHT-planning strategies that could be appropriate for you, which we could explore as part of your estate plan. 

Make good causes part of your financial plan

If you’d like to discuss how to make charitable giving part of your financial plan, please get in touch. 

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen. 

A pension is a long-term investment the fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

Past performance is not a reliable indicator of future performance and should not be relied upon.

Taxation planning, wills, and estate planning are not regulated by the Financial Conduct Authority.

FP39736 – APPROVED BY 2PLAN WEALTH MANAGEMENT ON 21.10.2026

The Orchard Practice (AR) Limited is an appointed representative of 2plan Wealth Management Limited. The Orchard Practice (AR) Limited is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk ) under reference 216479. Registered office: 2 Penta Court, Station Road, Borehamwood, Hertfordshire, WD6 1SL. Registered in England and Wales Number: 827478