Ex gratia payments – does the brand-new car come with back-seat driving?

In November 2025, the long-awaited changes to the ex gratia regime under the Charites Act 2022 came into force. By way of high-level summary, these put charities more in the driving seat, so to speak, with decision-making over ex gratia payments.

Quick reminder – what is an ex gratia payment?

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 which – in all the circumstances – the charity trustees could reasonably be regarded as being under a moral obligation to make. It’s a scenario that crops up most often for charities dealing with legacies – for example, where a potential beneficiary under a Will feels that the Will does not reflect the testator’s intentions, but they don’t have legal grounds to challenge the Will.

What’s changed and what benefits have the changes brought?

On the surface, the recent changes seem to be good news all around. They make it easier and quicker for charities to make ex gratia payments, removing the need to involve the Charity Commission where the value of an ex gratia payment is within the relevant threshold. (This is £20,000 for charities with an income of over £1m: there’s more detail on the thresholds in our previous article on the changes). Previously the Commission had to approve all payments (although in practice it said that it was unlikely to challenge payments of under £1,000). There’s also no limit on the number of ex gratia payments that a charity can make using the power to make smaller ex gratia payments, as long as each payment does not exceed the relevant threshold.

Moreover, the amended rules usefully allow trustees to delegate decision-making on ex gratia payments to others at their charity, such as staff or committees. (Previously, the obligation attached to the trustees personally to be satisfied of a moral obligation; the test is now an objective one: ‘in all the circumstances the charity trustees could reasonably be regarded as being under a moral obligation’.)

The changes will reduce the administrative burden on trustees, and, in relation to smaller ex gratia payments, reduce the internal (and sometimes external) costs and delays of dealing with the Charity Commission in situations where charities feel that there is a clear ex gratia scenario. These are certainly welcome benefits for charities.

Is there another side to the coin?

Under the previous system, the need to seek the Charity Commission’s consent before a charity could make an ex gratia payment could create unwanted “red tape” in clear-cut ex gratia scenarios. However, it also offered both a deterrent and a “safety net” in the case of speculative requests. Not only could it deter some requests being made in the first place, but a refusal decision by the Commission made it difficult for the person(s) making the request to criticise the charity.

The changes, however, remove regulatory scrutiny of proposed payments (or waivers) that are below the relevant threshold.

First this might encourage more requests to charities for ex gratia payments and charities may find it harder to refuse (though the high bar for making an ex gratia payment has not changed).

Second, there’s no limit on the number of smaller ex gratia payments charities can make up to the threshold applicable to their charity. If charities make a large number of smaller ex gratia payments, this could lead to public and regulator criticism.

What does this mean for charities?

Criticisms in the media or on social media that a charity has made an immoral, unfair or flawed decision to refuse an ex gratia payment could risk reputational damage to the charity. It could also potentially incur costs for the charity in having to defend allegations and protect its reputation. But the charity shouldn’t lose sight of the fact that there is no legal obligation to make the payment, and the default position is that it must use its resources for its purposes.

Given that the trustees can now delegate decision-making on ex gratia payments to staff and there is no limit on the number of smaller ex gratia payments charities can make up to the threshold applicable to their charity, it will be really important to have crystal clear guidelines about the circumstances in which an ex gratia payment might be appropriate, and where it wouldn’t be in line with the Charity Commission’s guidance. Charities should be making sure that their schemes of delegation are up to date.

What about disclosure?

The Charities Statement of Recommended Practice (SORP) 2026 applies for reporting periods starting on or after 1 January 2026.

Under the SORP 2026, charities must disclose details of all ex gratia payments in their accounts. For each payment, the notes to the accounts must:

• explain the nature of the payment;
• set out the legal authority or reason for making it; and
• state the amount or value.

Charities are able to aggregate payments that relate to legacies where this would not impact on the understanding of the arrangement.

Interestingly, this isn’t a change as far as legacies are concerned – under the earlier SORP, charities had to disclose the same information and could aggregate ex gratia payments relating to legacies. But with a potential increase in ex gratia payments as a result of the new flexibilities, charities should be aware that the disclosure requirements may exacerbate the risk of criticism from those who feel that charities have gone too far – or not far enough – in making ex gratia payments out of charity funds.

Takeaway thoughts

The changes to ex gratia payments under the Charities Act 2022 give charities welcome empowerment over ex gratia decision-making, and a useful ability for trustees to delegate. But with this new authority comes the potential for charity decision-making, both in relation to declining ex gratia requests and also making them, to come under increased scrutiny.

If you have any questions on the above, get in touch with our charity legacy team.

The material in this article is provided for guidance and general information only and is not intended to constitute legal or other professional advice upon which you should rely. In particular, the information should not be used as a substitute for a full and proper consultation with a suitably qualified professional. Please do contact the Bates Wells team if you require further information.