Charitable giving – doing it right

The war in Ukraine and cost of living crisis have prompted many people to support charities helping those affected. Various schemes can boost the value of your charitable donations.

Gift aid

Charities can claim back basic rate tax on donations, meaning for every £1 you give the charity gets £1.25. This scheme is for UK taxpayers. Higher rate and additional rate payers can also reclaim the tax paid on donations through self-assessment. This can effectively lower the net income at which their tax is calculated, which can be beneficial for those earning just over £50,000 who pay the High Income Child Benefit Tax Charge.

It isn’t just big national charities like DEC, Cancer Research or Trussell Trust that use gift aid. If you make a voluntary donation (of at least 10%) on top of the standard ticket price to many museums and art galleries, then the total value of your purchase can benefit from gift aid. You can also use gift aid when buying an annual membership to these organisations.

Give as you earn

Some companies allow employees to make regular charity donations direct from their gross salary, exempting these donations from tax, although they are subject to national insurance contributions.

Charitable legacies

If you leave a charitable donation or legacy in your will, it won’t be included within your estate when calculating inheritance tax (IHT). What’s more, if you bequeath at least 10% of your net estate to charity, any IHT due is charged at 36% rather than 40%.

Share gifting

Shares donated to charity are not subject to capital gains tax (CGT). The value will also be deducted from your taxable income, potentially reducing income tax. If a charity can’t accept shares directly you can sell them on their behalf, again avoiding CGT, although you will need an instruction from the charity.

The Financial Conduct Authority does not regulate tax, Wills or estate planning advice.

Tax treatment varies according to individual circumstances and is subject to change.

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