Year-end giving: how to gift tax-effectively

“Spring is the time of plans and projects.” Leo Tolstoy

As spring beckons and we look forward to longer, warmer days, it is easy to forget that another tax year is drawing to a close. As well as getting stuck into garden projects and planning summer holidays, it is worth tending to your tax position for 2023/24 while you still can. One area of tax planning that we are often asked about is gifting; in some cases 5 April is the last date to take action for this year.

Charitable donations

If you want to support charities tax-effectively, you can do this in a number of ways, including:

  • By gifting cash under the Gift Aid Scheme
  • By donating goods to a charity shop using the Retail Gift Aid Scheme
  • By direct deduction from salary through Payroll Giving
  • By making gifts of quoted shares and land

Further details on some of these are set out below.

Gift Aid Scheme

Gifts of cash made to a UK charity benefit from generous tax reliefs, provided certain conditions are met; the most important being that you must make a Gift Aid declaration and that you must not receive any significant benefits in return.

The charity can claim from HM Revenue and Customs (HMRC) an extra 25% on top of your gift, representing the basic rate tax that you have paid. Be aware that you must have a sufficient income tax and/or capital gains tax liability for that year to cover the charity’s claim, or you will be required to pay an extra tax charge through your Self-Assessment tax return. UHY can calculate your scope for making tax-efficient donations if you are unsure.

If you are a higher or additional rate taxpayer you can claim further income tax relief through your Self-Assessment tax return. Gifts made in one tax year can be carried back to the previous year, provided they are made before the tax return for the earlier year is filed with HMRC. This means that if you miss the end of the tax year on 5 April 2024, you can still make donations and claim the tax relief on your 2023/24 tax return.

Don’t forget that if you make a gift from a joint bank account this should be split between the donors on their respective tax returns.

American donors

If you pay tax in the USA as well as the UK, you can make charitable donations that are tax effective on both sides of the Atlantic, even where the charity is not a UK qualifying one.

You can consider using a ‘donor-advised fund’, a special arrangement whereby gifts are made to an account with a qualifying UK umbrella charity which can make donations to a US charity of your choice. These can be set up through various providers, including the Charities Aid Foundation. UK tax relief is available on your cash gifts into the fund and US tax relief is then obtained when the donations reach their end charity.

Charitable foundations 

Where substantial amounts are to be given to charity, donors might wish to consider a private charitable trust or foundation through which donations or grants can be made. The legal and administrative costs can be significant, but many individuals and families find this a good way to centralise and manage their charitable giving. UHY can work with you and legal professionals to achieve your aims.

Gifts of qualifying assets to charity

If, instead of cash, you are thinking of giving assets to charity, the tax rules are very different. In particular, there is no ‘carry back’ to earlier years so any gift needs to be made by 5 April.

For gifts that qualify, tax relief is given by reducing taxable income by the market value of the asset gifted and this is claimed on the Self-Assessment tax return. Qualifying investments include:

  • Listed shares or securities (including those in AIM listed companies
  • Authorised unit trusts
  • OIECs
  • Offshore funds
  • Qualifying interests in UK land 

The donation of a qualifying gift to charity is usually effected by a deed of gift and a market valuation will need to be obtained, so there is some administrative cost. However, it is more tax-efficient than selling an asset and gifting the proceeds via Gift Aid, because capital gains tax would be payable on a sale at profit whereas the gift of an asset to charity does not give rise to a chargeable gain.

Cultural gifts scheme

If you donate pre-eminent objects of ‘national importance’ to the state you can receive a tax reduction equal to 30% of the market value of the asset. Qualifying objects could be pictures, prints, manuscripts, works of art, scientific objects, etc. although there is no guarantee that any item will be accepted by the state.

Inheritance tax considerations

An often forgotten point is that gifts to charity, either during lifetime or on death, are exempt from inheritance tax (IHT).  Even less well known is that a reduced rate of IHT applies to an estate where 10% or more of the net estate is left to charity. UHY can advise you regarding this relief.

We can also advise you on Will planning in general, on gifts to family members and the use of other IHT reliefs, including the annual exemption and the potentially highly valuable relief for gifts which are ‘ordinary expenditure out of income’.

Treat yourself!

Finally, don’t forget that you can give to your future self by making pension contributions or investing in an ISA by 5 April; there is no time like the present to think about it, in order to use your annual allowances while you can. Our personal tax specialists and in-house financial advisers would be happy to help you consider whether either option is right for you.

The next step

If you would like any further information or would be interested to discuss any of the above, please get in touch with Clare Walliker on, your usual UHY adviser.

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