Share gifts made up 31% of donations via Charities Aid Foundation in 2023

7th August 2024

Donating shares is one of the most tax-effective ways to give to charity

• CAF managed approximately £45 million-worth of share donations on behalf of private clients last year.
• Giving HMRC qualifying shares to charity benefits from Income Tax relief and exemption from Capital Gains Tax.
• CAF is calling for changes to allow for donation of unlisted shares to attract the same benefits.
  

Donating shares is one of the most tax-effective ways to give to charity, yet the vast majority of UK charities can’t accept gifts of shares. Charities Aid Foundation (CAF), which this year marks 100 years as an organisation at the centre of the giving world, managed approximately £45 million-worth of share donations on behalf of private clients in 2023; 31% of the value of total gifts made by private clients through the charity last year.

Giving HMRC qualifying shares (i.e. listed shares) to charity means you get Income Tax relief on the value of the shares as well as exemption from Capital Gains Tax.

Donors can also donate multiple securities to a donor advised fund (DAF), offered by organisations like CAF, in one transfer, then decide later which charities to donate to. You can even leave your shares in your will to CAF, which can then be sold for the proceeds to be given to the charity or charities of your choice.

It could also mean an even bigger donation for the causes that need it most, although the charity won’t usually be able to claim the Gift Aid. But the different options of gifting selling your shares to a charity or donating your share gains have different implications for your taxes and the recipient.
It’s therefore important to discuss your personal circumstances and motivations with an adviser before deciding which is the right approach for you.

The options available include:

• Gift shares - When you gift shares to charity, you can get relief from capital gains tax and can claim income tax relief. For a long-term approach, you can donate your shares into a DAF and organisations like CAF will manage and grow the funds to increase the amount to give to charity.
• Sell your shares - Sell your shares to an organisation like CAF for less than their value and then the gain generated will be placed into your DAF or charitable account. This means that you can reduce your taxable income by the donation amount (i.e. the market value of the shares, plus any costs of the transfer, less the sale price paid by the charity), reducing your overall income tax liability as well as the capital gains tax due.
• Donate your share gains - Generally, giving shares to charity will be simpler than selling the shares yourself. But depending on your personal tax situation, selling shares yourself and donating the proceeds to a DAF or charity account could be more tax effective. By donating the proceeds as cash, the gifts will get a Gift Aid uplift of 25%, and you can also claim higher rate or additional rate tax relief on the gross value of the cash donation.

In a survey of 215 professional advisers, CAF found that 29% would appreciate more knowledge about donating non-cash assets including shares.

Edward Garrett, Head of Private Clients, Charities Aid Foundation (CAF) said: "Our experience with philanthropic clients highlights an increasing group of donors giving securities to charity. But advisers need to increase their understanding of the options available to their clients.

“Given the popularity of share gifts, we’d also encourage the Government to consider extending tax reliefs on gifts of a wider range of assets, including unlisted shares, as in the US for example."

Michael J Lewis, Partner, EY said: “The ability to claim capital gains tax and income tax relief on a charitable gift of qualifying shares is a powerful tool in incentivising charitable giving.

“Unfortunately, too few individuals seem aware of the advantages of giving shares as opposed to cash. The charitable sector, advisers and government all need to improve their communication of this issue.”

Notes to editors

• For more information or interview opportunities please contact media@cafonline.org
• Survey of 215 advisers; 69% IFAs, 24% chartered planners, 7% wealth managers, October 2023, Incisive Media on behalf of Charities Aid Foundation.