The last few years have presented challenges to many organisations, and charities are no exception – so in difficult times how can you make sure that charities receive ‘added value’ from your donations? Well the first step is to make sure that you make use of the various tax reliefs that are available for charitable giving.
If you are a UK taxpayer then Gift Aid is a very straightforward way of providing charities with extra cash on top of the money you give, because all gift aid donations are treated as made after deduction of basic rate tax which the charity can claim back. So for each £1 you donate the charity can reclaim an additional 25p - and if you are a higher or additional rate taxpayer you can claim additional tax relief yourself. So if you are a 40% tax payer and make a gift aid donation of £100 to charity the result is the charity has £125, but the net cost to you after tax relief is just £75. If you are an additional rate tax payer the net cost would be £68.75.
It is also possible to claim tax relief sooner by claiming for donations made in the current year in your previous year’s tax return. This is provided that you haven’t already submitted your tax return and the donations qualify for gift aid. This can be advantageous to individuals looking to reduce their tax bill sooner, or are subject to a higher rate of tax in the previous year.
Tax relief can also be gained by donating straight from your wages or pension. Check to see whether your employer or pension provider runs a scheme. If they do then donations are treated as a deduction to your income prior to the calculation of tax.
Tax Relief and Company Donations
Companies can also claim tax relief on cash donations made to charities. Reliefs are available for gifts of land and property or qualifying shares, so it is worth taking advice in advance if such transactions are being contemplated.
Legacies are also an invaluable source of funds for many charities. Charitable legacies are themselves exempt from Inheritance Tax (IHT), but additionally if you leave at least 10% of your net estate to charity the IHT rate payable on the remainder of your estate is reduced from the current 40% to 36%. This may not sound like a large reduction, however this means that if your Will presently contains a charitable legacy, then depending on the level, you could increase this to 10% (making the charity much better off) with no detriment to your other beneficiaries because it is HM Revenue & Customs that suffers the loss. This would occur where the increase in donation is offset by the fall in the tax rate. So now may be a good time to review your Will and consider how charitable legacies could be of benefit to you as well as the charities you support.
Finally, tax reliefs are not the only way to maximise the benefit of your donation to charity. Certain firms and organisations offer ‘matched giving’ so that every £1 raised by or donated to a charity is matched by an extra £1, and this is something you may wish to look out for to make your donation that much more worthwhile.
If you are interested in making a donation to a charity and would like further advice on how to obtain the best value from your donation then please email firstname.lastname@example.org