Gifts that keep giving
CHRISTMAS is a time for giving and if you want to help your favourite charity, you should aim to do so as tax efficiently as possible. With a little planning you can maximise the amount that goes to good causes, and minimise your tax bill as well.
That way everybody wins and the taxman will not complain either, because even HMRC likes to spread a little goodwill sometimes.
GIFT AID
The British are a charitable bunch, with more than half donating a total of £10.3 billion last year and one in six volunteering.
Medical research was the most popular cause, with one in four helping out, closely followed by animal welfare, then children and young people, according to the Charities Aid Foundation (CAF).
You can enhance any donation by signing a Gift Aid declaration, which allows the charity to reclaim the basic rate tax you have already paid on the money.
Ben Russell, CAF director of communications, said: “This way a donation of £1 will be worth £1.25 to the charity, but only if the declaration is signed.”
This usually just means ticking a Gift
Aid box, but one in four fails to do this, meaning charities miss out on nearly
£600 million a year.
TAX BENEFITS
Higher rate taxpayers who fill in a selfassessment return can claim the difference between basic and higher rate tax for themselves.
If you give £1, Gift Aid will lift its value to £1.25 and you can then claim back 20 per cent of that, or 25p, for yourself.
A lesser-known option is to gift any shares you own directly to charity. Russell said: “You get full tax relief on any capital gains and may also claim income tax relief on the market value of the shares.”
Leaving a charitable legacy can cut your estate’s inheritance tax (IHT) liability when you die. “If you give 10 per cent of your net estate, you can reduce the IHT rate on the remainder from 40 per cent to 36 per cent,” he said.
Say £100,000 of your estate is subject to IHT, you would normally pay £40,000 on this, leaving your family with £60,000.
If you gave away £10,000 and paid 36 per cent on the remaining £90,000, your family would have £57,600. They get £2,400 less, but the charity benefits to the tune of £10,000. You can also give land and property direct to charity with the gift exempt from capital gains tax and IHT, and even claim income tax relief on top.
CHARITABLE CHOICES
Give As You Earn, or payroll giving, allows you to donate directly from your pay and claim tax relief, so donating £1 would only cost a basic rate taxpayer 80p. You may also donate tax-efficiently through some workplace and personal pensions.
If you need to work off those Christmas pounds join a charity running event, with the average participant raising £442 for their chosen cause, according to CAF.
Volunteering is another option, with almost 12 million people offering help with a total value £22.6 billion, according to the Office for National Statistics.
SPEND AND GIVE
Sarah Coles, personal finance analyst at Hargreaves Lansdown, suggested raising money with a Christmas tidy up: “By clearing out unwanted clothes, toys and books, you can make space for this year’s presents and raise money for charity shops.”
Some shops let you sign a Gift Aid declaration so the amount raised through your donation is topped up.
You can donate any surplus food to a local food bank through permanent collection points in 600 Tesco stores, with the grocer adding an extra 20 per cent to the value of donations, Coles added.
Another option is a charity credit card, which typically donates 25p for every £100 spent. Or give as you spend through sites such as EasyFundraising.org.uk and GiveAsYouLive.com. She said: “Register with a cause and then click links to thousands of major retailers with a percentage of your spending donated to the charity.”