Want to cut your tax bill? Give to The Telegraph appeal

As the tax return deadline looms on Jan 31, many are likely to feel the pinch despite National Insurance reductions in the Autumn Statement.

The nation’s tax burden is set to hit a post-war high of nearly 38pc in 2029, so it’s more important than ever to make sure you’re making the most of all the tax reliefs available.

The figures, from the Office for Budget Responsibility, show the effect of the Government’s long freeze on tax thresholds.

There are things you can do to reduce your tax bill – and charitable donations are one of them. Luckily, there’s still time to donate to the Telegraph Christmas Charity Appeal 2023.

Running for more than 100 years, generous readers have helped The Telegraph raise nearly £30m for charities. This year, you can donate to our four chosen charities: Marie Curie, The RAF Benevolent Fund, Race Against Dementia and Go Beyond.

HOW TO DONATE TO CHARITY AND MAXIMISE TAX RELIEF Understanding the tax implications of donating to charity can maximise your generosity and reduce the tax burden.

Around 1.27 million people declared charitable donations on their self-assessment tax returns in 2022, according to the latest HMRC figures. This is a key step in claiming tax relief.

The most important thing to remember for getting charity tax relief? Keeping the evidence. Shaun Moore, tax and financial planning expert at Quilter, said: “Keeping records of all your donations, including bank statements or confirmation letters from charities, is crucial for claiming any tax relief. This documentation is essential, yet often neglected.”

There are four main ways to claim tax relief when making charitable donations to ensure a win-win situation for both you and your chosen charity.

GIFT AID

The Gift Aid scheme allows charities to claim the tax you have paid on the donated money from the Government, as long as you are a UK taxpayer.

Charities can increase the value of your donation by 25p for every £1 you donate at no extra cost to yourself. Donations will qualify for Gift Aid as long as they are not more than four times the amount of tax you’ve paid in the current tax year.

But if the charity gets back more tax than you’ve paid, you may be asked to pay the outstanding balance to HMRC.

To claim tax relief, you must be a higher-rate or additional-rate taxpayer. Say you’re a higher- rate taxpayer and donate £100. The charity will claim Gift Aid to receive £ 125, but as you pay tax at 40pc you can personally claim back the difference between this rate and the basic tax rate of 20pc. A claim for 20pc of the total donation comes out at £25.

To make use of the scheme, you must make a Gift Aid declaration for the charity to claim and the charity will give you a form to sign.

However, those on low incomes should be mindful. David Wright, a technical officer for the Association of Taxation Technicians, said: “People who pay little or no tax in a year need to remember the consequences of ticking the Gift Aid box when donating to charity, which can include other forms of donation such as adding Gift Aid when paying a museum entrance fee.”

PAYROLL- GIVING SCHEME

You can make tax- free donations directly from your salary if the company you work for offers a Payroll Giving scheme. Your donation will be deducted from your wages or pension before tax but after National Insurance.

The amount of tax relief you get depends on the rate of tax you pay. For every £1 donated, basic taxpayers pay 80p, higher-rate taxpayers pay 60p and those who pay the additional-rate pay 55p. These rates vary in Scotland.

As the donations are made pre-tax, you won’t receive any rebate or tax code change. Sean McCann, Chartered Financial Planner at NFU Mutual, said: “Giving money to charity can have other positive outcomes, such as a reduced liability for the child benefit tax charge, or if it takes total ‘adjusted income’ below £50,270 it can give entitlement to the married couples allowance and increase the personal savings allowance from £500 to £1,000.”

Ask your employer to set up a Payroll Giving scheme.

GIVING WITH NON- CASH ASSETS You’re not restricted to just donating cash – can also decide to donate assets to charity, and doing so can still save you tax. Mr Moore said: “Donating

Charities can increase value of your donation while you get tax relief

You can make tax-free donations straight from your pay packet. For every £1 donated a basic-rate taxpayer pays 80p pre-tax

Leaving at least 10pc of your net estate tro charity can mean your heirs pay a reduced rate of IHT of 36pc shares, securities, land, or buildings is another tax- efficient method, yet not widely known. This not only entitles you to income tax relief but also spares you from capital gains tax.”

You can pay less income tax by deducting the value of your donation from your total taxable income in the same tax year.

LEGACY GIVING

Given annual inheritance tax revenue is predicted to soar from £ 7.1bn in 2022-23 to almost £10bn in 2029. You can do this by specifying charitable gifts in your will, which your executors will be left to carry out for you.

You can choose to donate items, a fixed amount of money, or just whatever is left after gifts have been given out.

Charitable donations are IHT-free and the value is removed from a donor’s estate before tax is calculated, so it can be a good idea if you want to reduce the value of your estate to below the £325,000 tax-free threshold, or who just want to reduce the tax their heirs are left to pay.

Mr McCann said: “Leaving at least 10pc of your net estate to charity on your death can mean your heirs pay a reduced inheritance tax rate of 36pc on the remainder of the estate, rather than 40pc.”

Floris de Bruin