Charities sometimes wish to make “ex gratia” payments for various reasons, i.e. payments that are not for their charitable purposes where they do not have a legal obligation to make any payment but they consider they have a moral obligation to make it.

This topic is covered by the Guidance Note: Ex Gratia Payments by a Charity. It explains what an “ex gratia” payment is. It deals with the current law on the subject as amended with effect from 27 November 2025 by the Charities Act 2022. 

The Guidance Note also explains the previous law that applied up until 27 November 2025. 

The Act put on to a statutory footing the common law rules about ex gratia payments by charities previous to 27 November 2025, and it also reformed those rules. 

The Act provides that an ex gratia payment can be made if the charity trustees “could reasonably be regarded” as being under a moral obligation to make it. That test is based on the decision in Re Snowden [1970] 1 Ch 700. If trustees are of that view, they are not legally bound to make the payment but they may do so. 

In place of the previous blanket legal requirement for a charity to obtain the consent of the Charity Commission in all cases in order to be able to make an ex gratia payment, however large or small, the Act introduced exceptions to the need for involvement of the Commission. It created thresholds for the amount of a payment permitted in any case so that if the intended payment is below the relevant threshold, the charity may make the payment without involvement of the Charity Commission.

The payment threshold applicable depends on the charity’s gross income in its last financial year, as follows.

Gross income - Maximum payment permitted

Up to £25,000 - £1,000

£25,001 to £250,000 - £2,500

£250,001 to £1,000,000 - £10,000

Above £1,000,000 - £20,000

Note that the payment refers to the maximum amount of any particular payment that may be made. So, for example, if a charity with gross income in the last financial year of, say, £200,000 makes an ex gratia payment in the current year of, say, £2,000 and another separate ex gratia payment in the same year of £2,200, the payments will fall within the rules under the Charities Act 2022 despite their total exceeding £2,500 since each of the two payments is less than £2,500. 

If the amount of any one intended payment would exceed the relevant threshold, a charity must obtain prior consent of the Charity Commission in the case concerned (See its guidance on applying for consent here, at paragraph 10). The thresholds can be amended in future by further regulations.