Cost-of-living squeeze hits donations to charity sector

How can donors continue to support the causes they care about? 

With households tightening their outgoings as the cost-of-living crisis worsens, new research from Charities Aid Foundation (CAF) shows cost pressures are affecting donations to charities.

Six in 10 (58%) people plan to cut back on discretionary spending over the next six months in order to manage their bills - rising to 69% amongst 25-34 year olds. Only a quarter of people (26%) say they won’t be cutting back on anything*.

For charities, this has a knock-on impact. Last month, only a quarter (25%) of people donated to charity in the past four weeks. This figure is significantly lower than the usual average for the month (29%), meaning that around 2m fewer people donated to charity than usual.

With many cutting back on discretionary spending, around one in 10 (12%) people reported last month that they plan to cut back on charity donations. However, as more families face financial struggles with the increased cost of living, previous research from CAF found that nearly nine in 10 (86%) charity leaders anticipate that demand for their services is likely to increase.

Many donors are looking at other ways to support charities or make the most of their donations. Options include:

1. Ensuring donations include Gift Aid Gift Aid is a scheme which allows registered charities to reclaim income tax on a donation made by a UK taxpayer, effectively increasing the value of the donation. For a basic-rate taxpayer, this adds approximately 25% to the value of any gift made under Gift Aid. A £1 donation will effectively be worth £1.25 to the charity, but only if the donation is declared. Every year more than £500 million of Gift Aid goes unclaimed, according to the Charity Finance Group.
   
   
2. Consider giving by a payroll giving scheme
   Payroll giving schemes – such as CAF’s Give As Your Earn (GAYE) – enables employees to give to any UK registered charity straight from their salary. Donations are tax-effective because they are taken before income tax is applied, which means the charities receive more of the employee’s donations and it costs the donor less. Some employers also offer to match contributions.
   
   
3. Donating goods
   Giving goods such as clothes, furniture, books, and other household items in good condition can be a useful and cost-effective way of supporting charities. These goods might go directly to individuals in need, or they may be resold in charity shops. Either way, it’s best to check what charities need before donating. Also don’t forget to consider Gift Aid, which can usually be added when donating physical goods too.
   
   
4. Giving time and skills
   Volunteers are the backbone of many charitable organisations and initiatives. Whether a person volunteers formally through a charity or simply offers their time to a friend or neighbour in need, they are effectively donating time and potentially making a significant impact on the lives of those around them. Another way of supporting charities can be by donating skills, for instance by helping a small local charity develop its website or giving a talk or a training session to a charity’s staff and volunteers.
   
   
5. Joining a community action group
   For those passionate about a particular cause or issue, joining a community action group can be a powerful way of supporting people in need. Whether one is advocating for safer streets or better housing, it is possible to contribute and campaign for change by writing to your local councils or MP, distributing leaflets, and talking within the community.

Alison Taylor, CEO of CAF Bank and Charity Services, Charities Aid Foundation, said:

“The pandemic has highlighted the vital role that charities play in our society, including those who work and volunteer for them. The cost-of-living crisis makes the value of charities’ work more visible than ever, while also placing these same charities under significant pressure as they seek to deliver their essential services and meet increasing demand from their communities.

“Even when household finances are being squeezed, we have been struck by how people continue to support the charity sector, seen for instance in the incredible public response to the DEC Ukraine Humanitarian Appeal. The most important thing is to make sure your donations are given effectively by taking advantage of the tax benefits on offer. There are also many other ways for people to support the work of charities that do not involve giving more money, such as volunteering your time and skills, which can make a huge difference.”

*All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1,088 people. Fieldwork was undertaken between 21 – 25 February 2022. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 16+).