Charitable giving – good for the charity, good for your tax bill

14 September 2017

Whether you are donating money online, contributing items to a charity shop or leaving a gift in your Will, giving to charity attracts a series of generous tax breaks.

The best known relief is Gift Aid, an arrangement under which the taxman tops up your cash donation with an extra 25% for the charity. You benefit from a reduction in your tax bill if you are a 40% or 45% taxpayer (assuming that you keep a record of your donations and remember to make an appropriate claim). For a 40% taxpayer, the relief is the same as the charity top-up – 25% of the sum given (so a cash donation of £100 results in a £25 discount on your tax bill).

Gift Aid is typically associated with donations of money, these days often made online. However, some charity shops now offer arrangements where you can gift the proceeds of selling your unwanted items and the relief applies in the same way. Admission fees for zoos and heritage attractions often also qualify. Some now ask for a ‘gift-aided admission fee’ that is higher than the standard price but should be pitched at a level that results in a net saving for a higher-rate taxpayer (again assuming that an appropriate claim is made).

If you make a gift of certain shares or securities, or of land/property, then provided the relevant conditions are satisfied you will avoid both Capital Gains Tax (CGT) on the disposal of your shares or land and enjoy a reduction in your Income Tax bill.

If you are interested in lifetime giving, there are various mechanisms that can make this easier including payroll-giving schemes and Charities Aid Foundations accounts. If you are a substantial donor, particularly one who wants to create a fund that will make regular donations in your name or that of your family (during lifetime or beyond), you might want to consider the establishment of a charitable trust.

If your gifts are smaller, or if you feel that your income is insufficient to support lifetime giving, you can still consider the inclusion of charitable legacies in your Will. Gifts to charity after death are not only Inheritance Tax (IHT) free but, if they exceed 10% of your estate in total, they can result in a lower IHT rate applying to your other assets.

If you have any questions regarding charitable giving and the tax relief that may come with it, please contact me or your usual UHY adviser for more information.

It is Remember a Charity in Your Will week. #HaveYourSay about the world you would like to leave behind. More details here.