What’s Good for Charity is also Good for You
Altruism is a hot topic but do you know what’s in it for you when you donate to charity? Here’s a simple guide on how to get the most from your charitable donations.
Let’s talk about tax relief. When you donate money to charity, if you are a UK taxpayer (provided you pay enough tax), then if you claim the Gift Aid on your donation, the charity will claim the Gift Aid amount from the Government. (Therefore it’s a no brainer to check the Gift Aid declaration). Additionally if you are a higher rate or additional rate taxpayer, you’ll get some income tax relief personally. Here’s an example of how it works;
You give £80 to charity, if Gift Aid is claimed, the Government give £20 to them also, and then as a higher rate taxpayer you’ll get £20 off your tax bill or £25 if you are an additional rate taxpayer (ie earning over £150k). For a further example, click here.
If you are not paying sufficient UK tax to cover the Gift Aid amount, then be aware it will be clawed back as a tax charge on you. So if your income falls under the personal allowance for example and you have no tax to pay, don’t tick the Gift Aid declaration if you don’t want to pay it personally.
In addition to gifting cash, you can gift land, goods or even shares and benefit from income tax or capital gains tax relief. You can even receive income tax relief on donating goods to your local charity shop if you register with them. Many employers also offer the opportunity to give through payroll giving, which means you pay out of your gross salary and pay less tax therein.
In order to claim the tax relief on personal donations, you would include it in your Self-Assessment Tax Return, or ask HMRC to amend your PAYE tax code to claim against any PAYE income, or you can ask HMRC for a P810 form if you’re not in Self Assessment. You do need to keep a record of your donations.
If you have an accountant and are in any doubt of how you can claim, just let them know the amount of donations you made and they will make the claim for you.
Beyond income tax relief you may also consider giving to charity out of your estate, sometimes known as legacy giving. This means that you can give to charity when you die and not pay inheritance tax on this amount (but don’t forget to check any rule changes on the amount you can give depending on the relevant tax year). You would simply nominate the charity and a specific amount or even an item (or perhaps a percentage of your estate) in your will. HMRC offer a clear guide if you want more information, click here.
Companies can also give to charity and save corporation tax, but they won’t be able to select the Gift Aid option and it would be a gross donation from profits.
Of course gifting cash or assets may not be feasible for you and there are many other ways to do your bit for charity. This could include volunteering, sponsored challenges or just giving back to the community in other ways. So give yourself a pat on the back regardless on how you show your philanthropy.
FUSE is an independent Chartered Certified firm of accountants and tax advisors based in Highgate Village, North London. We provide a dynamic range of services to clients working in property, media, entertainment and professional services. Our clients vary in size from self employed sole traders, small enterprises and medium size businesses. We believe that comprehensive financial planning and sound business financial advice are the keys to growth and profitability.