At a glance

  • Charities and good causes need your support as much as ever – and the benefits go both ways
  • Whether you’re donating £10, giving a slice of your monthly salary or gifting assets, there are tax advantages that can help both charities and your own finances
  • Tax-efficient charitable giving can help you reduce Income Tax, Capital Gains Tax and reduce the Inheritance Tax bill facing your family, all while helping your chosen causes

At a glance

  • Charities and good causes need your support as much as ever – and the benefits go both ways
  • Whether you’re donating £10, giving a slice of your monthly salary or gifting assets, there are tax advantages that can help both charities and your own finances
  • Tax-efficient charitable giving can help you reduce Income Tax, Capital Gains Tax and reduce the Inheritance Tax bill facing your family, all while helping your chosen causes

At a glance

  • Charities and good causes need your support as much as ever – and the benefits go both ways
  • Whether you’re donating £10, giving a slice of your monthly salary or gifting assets, there are tax advantages that can help both charities and your own finances
  • Tax-efficient charitable giving can help you reduce Income Tax, Capital Gains Tax and reduce the Inheritance Tax bill facing your family, all while helping your chosen causes

From raising funds for those affected by the coronavirus pandemic, to supporting a local good cause – giving to charity is more important (and urgent) than ever.

On the face of it, for many people, this might not seem a good time to be thinking about where and how to give money away.

But the benefits of donating to charities go both ways. While the emotional reward of supporting a cause you believe in is significant in itself, there’s also a positive pay-off for your own financial situation.

Here are some of the ways in which charitable giving can be a tax-efficient boon for your own savings.

Ticking the Gift Aid box

It’s only a small box, but ticking it when you’re helping friends or family raise money for a cause can make a huge difference to charities – and some donors can also offset it against their tax.

Gift Aid enables qualifying charities to reclaim basic-rate tax on your donation, provided you’re a UK taxpayer.

This means it effectively increases the value of your donation by 25%. So if you give £10 and declare that you want your gift to be treated as a Gift Aid donation, the charity will actually get £12.50.

Higher-rate taxpayers can claim income tax relief without affecting what the charity receives. For every £10 donated, a 40% taxpayer can save £2.50, while one paying 45% would save £3.12.

Good buys

With high streets effectively shut down in recent weeks, we’ve relied increasingly on internet retailing.

But you can still help your favourite causes when you’re buying stuff online, and it couldn’t be easier. There’s no big tax pay-off here, but it doesn’t cost you anything either.

If you register at Easyfundraising you can access retailers through the Easyfundraising website and then shop online as normal – with the retailers you buy from making a small donation to the cause you selected.

The site provides a list of thousands of causes to choose from and most big retailers now participate in the scheme – including Amazon, Boots, Argos, John Lewis, Currys PC World, M&S and Sainsbury’s.

Giving straight from your pay

Some employers and pension providers offer Payroll Giving schemes that allow you to donate straight from your salary. This is a way of spreading the cost of donating across regular payments (typically monthly), while you also benefit from tax relief on your donations at your highest rate of tax.

Share and share alike

This is a method that’s often overlooked, but gifting shares is both tax-effective and simple. Tax rules mean that if you give qualifying shares, land or certain other items (such as particular artwork) to charity, you won’t have to pay tax on the transfer and you can take the value of your donation from your total taxable income for the year in which you made the gift.

The charity has the option of either using the dividends from the shares – if they decide to accept them in that form – or benefiting from the proceeds of the sale of the shares.

In some cases, you will be asked by the charity to sell the item and then give them the proceeds. In this case, keep a record of their request so that you can protect yourself from a potential Capital Gains Tax charge.

Leaving a legacy

Charity giving can help you and your family reduce the Inheritance Tax (IHT) bill you leave when you die. Firstly, gifts to charity are not subject to IHT.

Moreover, if you leave at least 10% of the net value of your estate to charity, the IHT charge on the estate above the nil-rate band (£325,000, or £650,000 for spouses and civil partners) reduces from 40% to 36%.

It’s all about trust

By setting up a charitable trust or foundation, you are creating a legal, registered charity in which you can set aside assets or income for charitable causes.

For example, say you have come into a lump sum from selling a business. You might want to support a particular project, several different causes or have certain criteria that potential causes should meet.

A charitable trust allows your assets to be held for a certain amount of time and your money managed by trustees to ensure that your assets are used according to your wishes.

A charitable trust also shelters those assets or income from potentially significant Capital Gains Tax, Income Tax and IHT. However, they can be complex to set up and must meet certain rules, so professional advice is essential.

Tax-efficient saving can sound dry and even exclusive. But it doesn’t need to be. Whether you’re supporting a friend’s charity run, shopping online or wanting to use your income or assets as a force for good, charitable giving can be a win-win scenario for all concerned.

 

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority.

From raising funds for those affected by the coronavirus pandemic, to supporting a local good cause – giving to charity is more important (and urgent) than ever.

On the face of it, for many people, this might not seem a good time to be thinking about where and how to give money away.

But the benefits of donating to charities go both ways. While the emotional reward of supporting a cause you believe in is significant in itself, there’s also a positive pay-off for your own financial situation.

Here are some of the ways in which charitable giving can be a tax-efficient boon for your own savings.

Ticking the Gift Aid box

It’s only a small box, but ticking it when you’re helping friends or family raise money for a cause can make a huge difference to charities – and some donors can also offset it against their tax.

Gift Aid enables qualifying charities to reclaim basic-rate tax on your donation, provided you’re a UK taxpayer.

This means it effectively increases the value of your donation by 25%. So if you give £10 and declare that you want your gift to be treated as a Gift Aid donation, the charity will actually get £12.50.

Higher-rate taxpayers can claim income tax relief without affecting what the charity receives. For every £10 donated, a 40% taxpayer can save £2.50, while one paying 45% would save £3.12.

Good buys

With high streets effectively shut down in recent weeks, we’ve relied increasingly on internet retailing.

But you can still help your favourite causes when you’re buying stuff online, and it couldn’t be easier. There’s no big tax pay-off here, but it doesn’t cost you anything either.

If you register at Easyfundraising you can access retailers through the Easyfundraising website and then shop online as normal – with the retailers you buy from making a small donation to the cause you selected.

The site provides a list of thousands of causes to choose from and most big retailers now participate in the scheme – including Amazon, Boots, Argos, John Lewis, Currys PC World, M&S and Sainsbury’s.

Giving straight from your pay

Some employers and pension providers offer Payroll Giving schemes that allow you to donate straight from your salary. This is a way of spreading the cost of donating across regular payments (typically monthly), while you also benefit from tax relief on your donations at your highest rate of tax.

Share and share alike

This is a method that’s often overlooked, but gifting shares is both tax-effective and simple. Tax rules mean that if you give qualifying shares, land or certain other items (such as particular artwork) to charity, you won’t have to pay tax on the transfer and you can take the value of your donation from your total taxable income for the year in which you made the gift.

The charity has the option of either using the dividends from the shares – if they decide to accept them in that form – or benefiting from the proceeds of the sale of the shares.

In some cases, you will be asked by the charity to sell the item and then give them the proceeds. In this case, keep a record of their request so that you can protect yourself from a potential Capital Gains Tax charge.

Leaving a legacy

Charity giving can help you and your family reduce the Inheritance Tax (IHT) bill you leave when you die. Firstly, gifts to charity are not subject to IHT.

Moreover, if you leave at least 10% of the net value of your estate to charity, the IHT charge on the estate above the nil-rate band (£325,000, or £650,000 for spouses and civil partners) reduces from 40% to 36%.

It’s all about trust

By setting up a charitable trust or foundation, you are creating a legal, registered charity in which you can set aside assets or income for charitable causes.

For example, say you have come into a lump sum from selling a business. You might want to support a particular project, several different causes or have certain criteria that potential causes should meet.

A charitable trust allows your assets to be held for a certain amount of time and your money managed by trustees to ensure that your assets are used according to your wishes.

A charitable trust also shelters those assets or income from potentially significant Capital Gains Tax, Income Tax and IHT. However, they can be complex to set up and must meet certain rules, so professional advice is essential.

Tax-efficient saving can sound dry and even exclusive. But it doesn’t need to be. Whether you’re supporting a friend’s charity run, shopping online or wanting to use your income or assets as a force for good, charitable giving can be a win-win scenario for all concerned.

 

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority.

From raising funds for those affected by the coronavirus pandemic, to supporting a local good cause – giving to charity is more important (and urgent) than ever.

On the face of it, for many people, this might not seem a good time to be thinking about where and how to give money away.

But the benefits of donating to charities go both ways. While the emotional reward of supporting a cause you believe in is significant in itself, there’s also a positive pay-off for your own financial situation.

Here are some of the ways in which charitable giving can be a tax-efficient boon for your own savings.

Ticking the Gift Aid box

It’s only a small box, but ticking it when you’re helping friends or family raise money for a cause can make a huge difference to charities – and some donors can also offset it against their tax.

Gift Aid enables qualifying charities to reclaim basic-rate tax on your donation, provided you’re a UK taxpayer.

This means it effectively increases the value of your donation by 25%. So if you give £10 and declare that you want your gift to be treated as a Gift Aid donation, the charity will actually get £12.50.

Higher-rate taxpayers can claim income tax relief without affecting what the charity receives. For every £10 donated, a 40% taxpayer can save £2.50, while one paying 45% would save £3.12.

Good buys

With high streets effectively shut down in recent weeks, we’ve relied increasingly on internet retailing.

But you can still help your favourite causes when you’re buying stuff online, and it couldn’t be easier. There’s no big tax pay-off here, but it doesn’t cost you anything either.

If you register at Easyfundraising you can access retailers through the Easyfundraising website and then shop online as normal – with the retailers you buy from making a small donation to the cause you selected.

The site provides a list of thousands of causes to choose from and most big retailers now participate in the scheme – including Amazon, Boots, Argos, John Lewis, Currys PC World, M&S and Sainsbury’s.

Giving straight from your pay

Some employers and pension providers offer Payroll Giving schemes that allow you to donate straight from your salary. This is a way of spreading the cost of donating across regular payments (typically monthly), while you also benefit from tax relief on your donations at your highest rate of tax.

Share and share alike

This is a method that’s often overlooked, but gifting shares is both tax-effective and simple. Tax rules mean that if you give qualifying shares, land or certain other items (such as particular artwork) to charity, you won’t have to pay tax on the transfer and you can take the value of your donation from your total taxable income for the year in which you made the gift.

The charity has the option of either using the dividends from the shares – if they decide to accept them in that form – or benefiting from the proceeds of the sale of the shares.

In some cases, you will be asked by the charity to sell the item and then give them the proceeds. In this case, keep a record of their request so that you can protect yourself from a potential Capital Gains Tax charge.

Leaving a legacy

Charity giving can help you and your family reduce the Inheritance Tax (IHT) bill you leave when you die. Firstly, gifts to charity are not subject to IHT.

Moreover, if you leave at least 10% of the net value of your estate to charity, the IHT charge on the estate above the nil-rate band (£325,000, or £650,000 for spouses and civil partners) reduces from 40% to 36%.

It’s all about trust

By setting up a charitable trust or foundation, you are creating a legal, registered charity in which you can set aside assets or income for charitable causes.

For example, say you have come into a lump sum from selling a business. You might want to support a particular project, several different causes or have certain criteria that potential causes should meet.

A charitable trust allows your assets to be held for a certain amount of time and your money managed by trustees to ensure that your assets are used according to your wishes.

A charitable trust also shelters those assets or income from potentially significant Capital Gains Tax, Income Tax and IHT. However, they can be complex to set up and must meet certain rules, so professional advice is essential.

Tax-efficient saving can sound dry and even exclusive. But it doesn’t need to be. Whether you’re supporting a friend’s charity run, shopping online or wanting to use your income or assets as a force for good, charitable giving can be a win-win scenario for all concerned.

 

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority.

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