The UK Government is introducing new rules on how charitable tax reliefs are to be used to prevent their misuse.

These changes are expected to take effect from April 2026 to maintain and improve transparency across the sector.

The Government has made it clear that its intention is not to reduce the availability of charitable tax reliefs, but the new rules will tighten compliance requirements.

What changes are being introduced?

The reforms to charity tax reliefs focus on tainted donations, approved charitable investments and how legacy income is treated for tax purposes.

These amendments to the existing charity finance rules will increase scrutiny on organisations and their trustees to ensure reliefs are used for genuine charitable purposes.

These changes will affect UK charities, Community Amateur Sports Clubs (CASCs), donors and advisers who support them.

What are the changes to tainted donations?

The tainted donations rules prevent individuals from receiving a financial benefit in return for making a charitable donation.

HMRC currently assesses whether a donation is tainted by looking at the motivation behind the arrangement.

Under the new rules, this will change to an outcome-based test, which focuses on the result of the arrangement.

Also, the definition of ‘financial advantage’ will be replaced with a broader concept of ‘financial assistance’.

This means that loans, guarantees or other financial support linked to a donation could now fall within the rules.

More arrangements could be subject to scrutiny to ensure that donors do not receive any direct or indirect financial benefit from their contributions.

How are approved charitable investments changing?

Charities are currently able to make certain investments without losing their tax reliefs via 12 recognised types of approved charitable investments.

Under the new rules, all approved investments must be made for the benefit of the charity and not for tax avoidance by any party.

How are the legacy income tax rules changing?

The treatment of legacy income will also be reformed.

Gifts left to charities in Wills are generally excluded from the definition of ‘attributable income’.

However, from April 2026, legacy income will be included within this definition.

This means that if legacy funds are used for purposes that do not further the charity’s objectives, HMRC could apply a tax charge to that income.

This reform is made to ensure that funds left to charities through Wills are used for genuine charitable activities.

How can we help your charity prepare for the tax changes?

Many well-governed charities may see limited impact from these changes, but the new rules could increase compliance responsibilities and the administrative burden that comes with this.

Charities may need to review their donation structures, investment arrangements and financial processes to meet the updated requirements.

Monitoring legacy income and maintaining clear records of how funds are used will also become increasingly important.

With the right professional support, you can understand how the new rules affect you and put the right processes in place.

Our specialist team can review your financial systems and ensure you maintain the necessary records required by HMRC.

We want to help keep your charity compliant and allow you to continue to focus on your charitable mission.

HMRC is expected to publish detailed guidance in April 2026 and we will continue to keep you informed on any updates that may affect your charity.

For further advice or support with your charity’s finances, get in touch.