Tax-effective giving to charity
If you give money or other assets to charity, you - or the charity - might be able to claim tax relief, reducing your tax bill or increasing your donation. To help you understand the tax benefits available, we’ve summarised them below.
Donate money to charity
If you give money and sign a Gift Aid declaration, the charity can reclaim the basic rate tax you’ve already paid on that donation. This means that a £1 donation is worth £1.25 to the charity.
If you’re a higher-rate taxpayer and fill in a Self Assessment tax return form, you can also claim back the difference between higher rate and basic rate tax on the value of your donation. For a 40% rate taxpayer, that means for every £1 you donate, you can claim back 25p in tax relief.
Our CAF Charity Account and CAF Charitable Trust offer flexible ways for you to give tax-effectively, meaning you have more to give to your favourite causes. Non-UK domiciled donors can give through a CAF Charitable Trust without making a taxable remittance to the UK.
Give straight from your salary
If your employer has a payroll giving scheme, such as CAF Give As You Earn, you can give directly to charity from your pay before tax is deducted..
This means you get tax relief at your highest rate of tax, so giving £1 would cost a basic rate taxpayer only 80p.
If you own shares, you can sell them and give the proceeds to charity via Gift Aid. Alternatively you can give your shares directly to a charity but your shares will need to be listed on a recognised stock exchange.
Giving shares is highly tax-effective as donors get full tax relief on any capital gains tax and also can claim income tax relief on the fair market value of the shares.
Leave a charitable legacy
If you leave a charitable legacy in your Will, it reduces the inheritance tax that has to be paid on your estate. There’s also an additional incentive for people to leave at least 10% of their net estate to charity, as they will pay a reduced rate of inheritance tax on the remainder of the estate.
The rate of inheritance tax for amounts over £325,000 has been cut from 40% to 36% for estates that leave 10% or more to charity.
Give land and property
Giving land and property direct to charity is exempt from capital gains tax and inheritance tax, and income tax relief can be claimed on the value of the gift.
Sell unwanted items
People can sell unwanted clothes, books, CDs and more through a UK charity shop - and then give the proceeds to the charity under Gift Aid.
The charity handles all the paperwork and the cash. Not all charities do this, so do check with your favoured charity shop first.
We can help you give tax-effectively in any of the ways above. Just fill in our contact us form
and we’ll get back to you.