There are many ways in which you can increase the value and impact of your charitable giving through tax benefits. NPC does not provide specific tax advice but below are some ideas to help make your giving more tax efficient.
Gift Aid
For every £1 donated by you, as a higher rate taxpayer (40%), the charity can claim an extra 28p, and you can claim back the difference between the basic and higher rate.
For instance:
- You write a cheque to the charity for £39,000 with a Gift Aid declaration
- The charity then claims an additional £11,000 from the Inland Revenue
- You receive £9,000 off your tax bill
Total cost to you: £30,000
Total donation to charity: £50,000
Giving shares, securities, land and buildings
UK taxpayers can donate shares and claim personal tax relief at their highest rate. No capital gains tax needs to be paid on gifts of shares, securities, land or buildings.
For instance:
- You donate shares worth £100,000
- Income tax relief at higher rate: £40,000
- Maximum potential capital gains tax saving: £40,000
Total cost to you: £20,000
Total gift to charity: £100,000
Legacies
If you leave money to a charity in your will, it will be paid out before inheritance tax is deducted, reducing the total amount of tax paid on the estate.
Charitable Trusts
Setting up a charitable trust with a unique name, charitable purpose and set of trustees is a way for you to involve friends and family members and ensure that your philanthropy continues for as long as you wish.
Benefits include:
- Gift Aid tax relief on money paid into the trust
- No income tax on investments made by the trust
- No corporation, capital gains or inheritance tax and reduced or no business rates
Payroll Giving
You can also give money to charity through a ‘payroll giving scheme’. It is taken directly from the employee's gross salary, so tax relief is included in the donation at the donor’s top rate of tax.
For instance:
If you give a charity £200 a month through payroll giving, the total cost to you is £120 (higher rate taxpayer).
For more information about tax efficient giving
The following organisations may be able to provide you with more specific advice on tax efficient giving