The Government will introduce tighter rules on charitable tax relief from April 2026, targeting arrangements that allow donors or third parties to gain financial advantages from charitable giving.
The reforms will apply to UK charities, Community Amateur Sports Clubs (CASCs), donors, and the agents or intermediaries who advise them. The changes focus on three areas – tainted donations, approved charitable investments, and attributable income.
The rules governing tainted donations will shift from a motivation-based test to an outcome-based approach. This means the focus will move away from why a donation was made and instead examine whether any financial benefit arises from it.
In addition, the current test of “financial advantage” will be replaced with a broader concept of “financial assistance”. This lowers the threshold for determining whether a donation is tainted and is designed to prevent donors from receiving direct or indirect benefits from their contributions.
The Government currently recognises 12 types of investments that qualify for charitable tax relief. From April 2026, all such investments will need to meet a single condition: they must be made for the benefit of the charity itself and not to facilitate tax avoidance by any party.
HMRC says the update will simplify the existing rules and close opportunities for misuse.
The definition of attributable income will also expand to include legacies left to charities in wills. Because legacies may already have benefited from inheritance tax relief, charities and CASCs will need to ensure these funds are used for charitable purposes or risk a tax charge.
HMRC has advised organisations to review their donation arrangements, investment activity, and the monitoring and use of legacy income. Detailed guidance is expected in April 2026.
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