TAX-EFFICIENT CHARITABLE GIVING

Charities across the UK have seen their fundraising events disappear during lockdown.

We’ve seen inspirational characters emerge to try and help the various causes, including 100-year-old Captain Tom Moore and 5-year-old Tony Hudgell.

But how can you help the charities in a tax-efficient manner?

Gifting cash

Payroll Giving – Many people are choosing to give up part of their income to donate to charity. One way to do this tax-efficiently is to use Payroll Giving. You can select a registered charity you wish to donate to and then advise your employer. The charitable donation is then taken before income tax is deducted (although national insurance will still be due on the amount gifted).

Gift Aid – Another way to give cash to a charity tax-efficiently would be to donate through the gift aid scheme. If you’re a taxpayer the charity can claim back basic rate tax, and you can claim higher rate or additional rate tax relief. For example, if you were to give £100 to a registered charity, the charity would receive your £100 plus £25 from HMRC. Assuming you pay tax at 40% you would be able to claim additional relief of £25. This means at a cost of £75 to you, the charity receives £125.

Gifting assets

Land, property and quoted shares – if you gift these assets to a registered charity you will get income tax relief based on the market value. This is given as a deduction against your total income, meaning you get tax relief at your marginal rate of tax.

Also, you won’t have to pay capital gains tax on the gift.

Longer-term planning

Charitable trust – If you are thinking you would like to support charities longer term and you are planning to make regular gifts of assets or income, you may wish to create your own charitable trust. You are then (subject to the various conditions) in control of the funds and how they get used.

You can also ask others to contribute to your charitable trust.

Leaving assets to charities in your Will

A final way to help charities is to leave a donation in your Will. Your estate should not have to pay any inheritance tax on the donation, and if you decide to leave 10% or more of your estate to charity the inheritance tax rate will fall from 40% to 36%.

There are other ways to gift to charity, too, and if you’d like to discuss the best option for you get in touch with Sarah Axe or another member of the private client team.