Ex gratia payments – Charities Act 2022 changes coming into force

Laura Soley and Alice Faure Walker, of ILM Corporate Partner Bates Wells provide an overview of changes to the Charities Act 2022.

The Charity Commission has announced that the relaxations to the rules on ex gratia payments introduced in the Charities Act 2022 are coming into force next week. Charity legacy managers will be breathing a sigh of relief.

An ex gratia payment is a payment (or giving up of an interest) which the charity doesn’t have a legal obligation to make and which can’t be justified as being in the interests of the charity, but the charity’s trustees feel under a moral obligation to make it.

From 27 November 2025, charities will be able to make ex gratia payments up to a certain level without consent from the Charity Commission:

The thresholds are fixed, i.e. a charity with income at the lower end of the range can still make a payment up to the maximum limit for its category. And the thresholds apply per payment, not per financial year. So, for example, for a charity with a gross income of £200,000 in its last financial year, the maximum single ex gratia payment it can make is £2,500 but the charity can, in theory, make payments of up to that amount to more than one person.

Payments which exceed the cap will still require Charity Commission consent.

The test will be revised so that trustees can delegate decision-making on ex gratia payments, e.g. to staff: there will still need to be a moral obligation to make the payment, but this will be an objective test. Charities will certainly want to look at updating their schemes of delegation for legacy administration to reflect this.

The delay in introducing the changes appears to have been due to concerns raised with Government about the likely impact on the scope for cultural artefacts to be returned by statutory museums and galleries. As such the regulations purport to exclude certain property held by some statutory institutions, including museums and galleries, from the scope of the changes. The changes – and the exclusions – can be found in the commencement regulations. Guidance from the Charity Commission about the changes is expected to be available on 27 November 2025. Laura Soley is a partner and Alice Faure Walker is senior counsel in the Charity legacies team at Bates Wells.