Understanding Ex Gratia Payments: What Charities Need to Know

Charities occasionally face situations where they feel a moral obligation to make a payment or waive a right to property, even though there is no legal requirement to do so. These are known as ex gratia payments. For instance

Adjusting a legacy where a will does not reflect the donor’s final wishes or making a payment to resolve a situation where fairness or compassion is at stake.

From 27 November 2025, new powers under the Charities Act 2022 will make the process simpler for Trustees.

1. Trustees must now apply an objective standard—could they reasonably be regarded as under a moral obligation?

2. Charities can approve small ex gratia payments without Charity Commission consent, based on income thresholds:

   • Up to £1,000 (income under £25k)

   • Up to £2,500 (income £25k–£250k)

   • Up to £10,000 (income £250k–£1m)

   • Up to £20,000 (income over £1m)

3. Trustees can delegate decisions to staff or committees, but remain ultimately responsible.

Payments above the financial thresholds or where the charity’s governing document restricts such actions still require Charity Commission authority.

Review your charity’s policies today. Make sure your team understands the new thresholds and delegation rules. If in doubt, consult the Charity Commission guidance.