How you too can benefit from being charitable
As generous Britons donated £10bn to good causes last year...
IF ONE of your financial New Year’s resolutions was to make this year as tax-efficient as possible, then it’s the perfect time to apply it to your charitable giving plans. Last year, the public donated more than £10billion. The most common way people give to charity is directly online – or via fundraising websites such as JustGiving or Virgin Money Giving. If you sign the Gift Aid declaration saying you are a taxpayer, then the charity can reclaim the equivalent of basic rate tax on the amount donated. So for every £8 you give, the charity can reclaim £2 so they get £10 in total.
For higher and additional rate taxpayers there’s a further incentive to give. While the charity still reclaims basic rate tax on the donation, the taxpayer can reclaim the difference between their tax rate and basic rate tax.
Tim Walford-Fitzgerald, tax partner at chartered accountant HW Fisher, explains: ‘For an £8 donation, the charity gets £2 and a higher rate taxpayer can then reclaim £2 through their tax return, so the real cost to them is only £6.’
Additional rate payers can claim back 25 per cent so the net cost of the £8 donation is just £5.50.
According to Sarah Coles, of Hargreaves Lansdown, only 22 per cent of higher rate taxpayers bother to reclaim tax on charitable giving, but she says: ‘It can really add up.’
Many people do not realise that a host of museums or attractions also have charitable status, so you could claim part of the cost of visits to places such as London Zoo or National Trust properties by signing the Gift Aid declaration when you buy a ticket.
People who are particularly taxsavvy can use charitable giving to defend their right to child benefit.
Says Walford-Fitzgerald: ‘If you earn more than £50,000 you start to lose your child benefit. With charitable giving being an allowable deduction, you could actually keep receiving more of it.’
With all this talk of benefit to the giver you might be wondering if the spirit of generosity is being lost.
But Jonathan Lachmann, principal in charities at HW Fisher, says: ‘What some very philanthropic individuals will do is to donate their Gift Aid tax benefit directly back to the charity, so the charity benefits twice.’
As well as cash, a less well-known but also tax-efficient way of supporting charities is giving shares or even land. People can give quoted shares directly to a charity without incurring any capital gains tax.
As with cash donations, they can claim income tax relief on the market value of the donation. Unlike with cash donations, the receiving charity will not benefit from Gift Aid.
If you prefer to give a regular amount, then your options include payroll giving, setting up a direct debit donation to your preferred charity, or even using a charity credit card which means a percentage of what you spend is given to charity, such as 25p in every £100.
Some shop loyalty card schemes include the option of donating loyalty points to charity while a growing number of retailers offer the chance of rounding up payments with the difference going to charity.
AT THIS time of year you might wonder what to do with any unwanted Christmas presents. A charitable option is to get down to your local charity shop who not only will be delighted to receive them, but they can also claim Gift Aid on donations once they are sold, boosting the value even further.
Leaving charitable gifts in your will reduces inheritance tax on your estate, meaning your loved ones also benefit.