On 27 November 2025, the final provisions of the Charities Act 2022 came into effect, introducing long-awaited reforms to the rules on ex gratia payments. These changes aim to simplify processes for charities while maintaining safeguards around trustees’ duties.
Updated Charity Commission guidance on “How charities can make a moral, or ‘ex gratia’, payment (CC7)” was published on the same day.
In simple terms an ex gratia payment is one a charity makes not out of legal obligation or in its best interests, but because trustees believe there is a compelling moral obligation to do so. In context, a ‘payment’ can also include transferring property, or waiving rights to money or property the charity is legally entitled to receive.
The question of ex gratia payments comes up, typically, in the context of gifts to charities made under a Will. For example, where there is evidence that the testator intended to change the terms of their Will so that other parties would benefit from their estate rather than the charity but, for whatever reason, did not manage validly to effect that change.
However there are a range of other circumstances where ex gratia payments can become relevant, where the trustees consider that, in all the circumstances, they are under a moral obligation to make (or waive) the ‘payment’.
Historically, all such payments required Charity Commission consent, regardless of size, and decisions could not be delegated beyond the trustees themselves. Although the Commission adopted a ‘de-minimis’ policy approach to cases where the amount was under £1,000, this often created a disproportionate administrative burden, particularly in legacy cases.
Under the new regime, charities now have a statutory power to make small ex gratia payments without Commission consent, provided they meet the criteria and fall within the relevant threshold, based on gross income in the previous financial year:
- Up to £1,000 for income of £25,000 or less
- Up to £2,500 for income over £25,000 and up to £250,000
- Up to £10,000 for income over £250,000 and up to £1 million
- Up to £20,000 for income over £1 million
These small payment limits apply per payment, not per year, and payments exceeding them will still require Commission approval. Importantly, the test for moral obligation has shifted to an objective standard, enabling trustees to delegate decisions to staff or committees, an efficiency gain for charities managing significant legacy income.
Cultural artefact restitution
The changes exclude certain property held by a number of listed national museums and galleries, including the Imperial War Museum and Royal Botanic Gardens, Kew. This effectively preserves the current prohibition on removing objects from the collections of a number of museums and galleries, addressing concerns about cultural artefact restitution. Charity Commission authority will still be required in those cases, but those named institutions can still use the statutory power in relation to assets outside those collections.
Checklist for compliance
- Update internal policies to reflect new thresholds and delegation powers.
- Review governance policies and procedures to confirm authority for staff or committees to approve ex gratia payments.
- Train relevant teams on the objective moral obligation test and reporting requirements.
- Monitor payment values to ensure they remain within statutory limits.
- Prepare for Commission approval where payments exceed thresholds or involve sensitive cases.
If you have any questions please contact Neil Burton or Sarah Williams.
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