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For deaths on or after 6 April 2012, there is a reduction in the rate of IHT from 40% to 36% where 10% or more of a deceased person's net estate is left to charity (such that the gift qualifies under IHTA 1984, s 23, see I4.215)¹.

The relief only applies where the net value of the estate (ie after deducting all liabilities, reliefs and exemptions but excluding the charitable legacy itself) exceeds the nil rate band².

The reduced rate applies automatically if the qualifying conditions are met, unless an election is made to opt out³.

The election must be made by all appropriate persons with respect to the qualifying components⁴ — see below.

It is important to note though that the reduced rate does not apply on the occasion of conditionally exempt property or settled property (I7.520) subsequently becoming chargeable⁵. Nor does it apply on the occasion of timber subsequently becoming chargeable (I4.127) or on the occasion of a second charge