New provisions for making ex gratia payments coming on 27 November 2025

An ex gratia payment is a payment, transfer of property or waiver of entitlement made by a charity to meet a moral obligation which the charity would not otherwise have legal power to make. It does not include payments made within the charity’s existing powers in its best interests and does not cover routine settlement of legal claims. A typical scenario is where executors ask a charity to waive a gift in a will, providing clear evidence that a testator had a firm, settled intention to change or remove the gift, but was prevented from doing so before death.

Under the current position, trustees cannot make the payment or waiver unless they first decide personally whether they are under a moral obligation and, in all cases, obtain an order from the Charity Commission before making an ex gratia payment.

As the reforms under the Act come into force on 27 November, the rules will change as follows:

• Small ex gratia payments can be made without Charity Commission consent, subject to income-linked thresholds and unless the governing documents exclude the power.
• For larger ex gratia payments, a Charity Commission order is still required.
• It must be reasonable to regard the trustees as being under a moral obligation, but the decision no longer has to be taken by the trustees themselves; it can be delegated in line with a charity's scheme of delegation.
• If the Charity Commission refuses to authorise an ex gratia payment, the First-tier Tribunal can review that decision.

The Act sets out thresholds for what constitutes a "small" ex gratia payment (i.e. a payment that would not require the Charity Commission's authorisation) as follows:

• £1,000 where charities have a gross income not exceeding £25,000.
• £2,500 where charities have a gross income exceeding £25,000 but not £250,000.
• £10,000 where charities have a gross income exceeding £250,000 but not £1 million.
• £20,000 where charities have a gross income exceeding £1 million.

These thresholds can be amended by a regulation by the Secretary of State. 

Therefore, trustees seeking to use the statutory power for ex gratia payments will need to ensure that:

• There is not another power available to the trustees to make a payment (i.e. in the charity's governing document)
• It is reasonable in the circumstances to regard the charity as having a moral obligation to make the payment (the test under the Act as to whether a moral obligation to make a payment exists is now an objective test)
• They either secure an order of the Charity Commission or they ensure the payment does not exceed the threshold relevant to their charity and check their governing document doesn't exclude the power.

The new powers, both to make small ex gratia payments and to apply to the Charity Commission for authority to make larger ones are available to charities generally, including those established by Act of Parliament. This was not previously the case, and shortly after the Act was made, concerns were raised about the potential impact of this extension on cultural items owned by charities like national museums and galleries whose Acts of Parliament prevent disposal of their collections. Working out these consequences is believed to have delayed this final stage of implementation. The solution is a simple one in that the regulations provide that listed collections continue to be excluded from the scope of these powers.

The Charity Commission is expected to release updated guidance on 27 November 2025 at the point of implementation.

For more information or advice, please contact Andrew Wherrett in our Charities team.