Ex Gratia (Moral) Payments: What Charities Need to Know

Recent changes to charity law, brought into force on 27 November 2025, have reshaped how charities handle ex gratia, or moral, payments. Although only a minority of charities encounter these decisions regularly, the implications are wide‑ranging: streamlined processes, clearer tests, new delegation options and refreshed responsibilities for trustees.

This article provides a practical overview of what has changed and what trustees and charity leaders should be thinking about now.

What Are Ex‑Gratia or “Moral” Payments?

Ex gratia payments arise when trustees believe there is a moral obligation to make a payment or waive a right, despite there being no legal obligation and no justification based on the charity’s best interests. These cases commonly occur in legacy situations, for example, where a donor intended to amend a will but died before doing so.

Traditionally, such payments required Charity Commission consent regardless of size, and trustees themselves had to make the decision. Even where the Commission informally indicated that payments under £1,000 were unlikely to be challenged, charities were still advised (for good governance) to seek consent.

What Has Changed?

1. An Objective Legal Test for Moral Obligation

The former test required trustees to personally feel a moral obligation. This has now been replaced with an objective standard, whether the trustees could reasonably be seen as being under a moral obligation.

This is a subtle but important shift: decisions must now be grounded in demonstrable reasoning rather than personal sentiment.

2. Ability to Make Small Payments Without Commission Consent

For the first time, charities may self‑authorise ex‑gratia payments within defined financial thresholds, which vary by gross annual income:

• Income ≤ £25,000 – £1,000 max
• Income > £25,000 and ≤ £250,000 – £2,500 max
• Income > £250,000 and ≤ £1 million – £10,000 max
• Income > £1 million – £20,000 max

These limits apply per payment, not per financial year. Payments that exceed these thresholds still require Commission approval.

3. Delegation of Decision‑Making

Trustees now have the option to delegate decisions on ex gratia payments, something not previously permitted. Delegation may be made to staff or committees, although trustees remain ultimately accountable.

This provides welcome operational flexibility, particularly for charities with significant legacy income.

4. Limits on Applicability for Some Institutions

The new powers do not override specific statutory restrictions, particularly relevant to national museums and galleries whose governing legislation prevents the disposal of certain cultural property.

These institutions may still make small ex gratia payments from other assets within thresholds, but cannot use the new powers to return protected artefacts.

Why These Changes Matter

The 2025 update is part of the final implementation phase of the Charities Act 2022, which was designed to reduce unnecessary regulatory friction while reinforcing sound decision‑making. Trustees, legacy teams, and charity administrators should recognise that:

• The bar for moral payments remains high; trustees must still be confident the charity would be acting wrongly, morally speaking, by refusing.
• Decision‑making processes should be updated to reflect the objective test and any newly delegated arrangements.
• Financial and governance policies must be revised to incorporate the new thresholds.
• Documentation remains essential: even smaller payments should be clearly recorded with reasons and evidence.

Practical Steps for Charities Now

1. Review and update internal policies, including schemes of delegation, legacy management procedures, and authorisation levels.
2. Train staff involved in legacy administration or donor relations on the new objective test and thresholds.
3. Ensure trustees understand their ongoing responsibilities, especially where decisions are delegated.
4. Check governing documents for any restrictions that might override statutory powers.
5. Document all ex gratia decisions, even those within the new small‑payment limits, to demonstrate compliance.

A More Flexible but Still Cautious Regime

The Charity Commission’s updated guidance marks a shift towards practicality, reducing unnecessary referrals while preserving the importance of thoughtful trustee judgment. For most charities, these changes will simplify the process without undermining the ethical responsibilities at the heart of ex gratia decisions.

As always, charities should approach moral payments with care: the easing of regulatory thresholds does not diminish the need for clear reasoning, solid evidence, and a firm grounding in the charity’s purpose and values.

If you would like more information, please contact our Charities and Not-For-Profit team here.