Maximise your Charity Donations

If you are giving to charity, there are several ways to maximise your donations.  Here, we show how to stretch your charity pounds:

Gift Aid Scheme
If you pay tax in the UK, then Gift Aid is a great way to increase the value of your gift to a charity.  Making your donation using Gift Aid will enable the charity to reclaim the basic rate tax on your gift to them. This means that if you give £10 to charity using Gift Aid that gift is worth £12.82 to the charity.  If you don't claim gift aid, the charity would only receive your original £10.  Subject to a few rules, you can give any amount, large or small, regular or one-off and the charity can reclaim the tax. If you are a higher rate taxpayer, you can claim relief on the difference between the basic rate and higher rate of tax. If you do not pay tax, you should not use Gift Aid.  For more information, see the HMRC's Giving to charities by individuals.

Example:

Charitable Donation Per Year	£100.00	£200.00	£300.00	£400.00	£500.00
22% basic tax rate (22/78th)	28%	28%	28%	28%	28%
The tax charities can reclaim	£28.21	£56.41	£84.62	£112.82	£141.03
Total Amount Received	£128.21	£256.41	£384.62	£512.82	£641.03
18% of the Total Donations	£23.08	£46.15	£69.23	£92.31	£115.38
Total cost to you	£76.92	£153.85	£230.77	£307.69	£384.62

Find out how much you could save with a Gift Aid calculator (see right-hand side)

Payroll Giving Scheme
Payroll Giving is a simple, tax effective way for you to give to charity from your payroll.  This scheme allows charities to combine fundraising and the building of relationships with their donors and the corporate community.  To start Payroll Giving simply ask your employer's payroll department to deduct regular charitable donations from your gross pay.  The company then passes that money to their chosen Payroll Giving agency, who send off the donations to the appropriate charities.  Unlike the Gift Aid Scheme, the charity does not have to reclaim the tax on Payroll Giving. The donation goes straight from your pay before tax is deducted and transferred into their bank account.  Less admin means more money going directly to good causes. 

Example 1: Basic Rate 22% tax payer

Charitable Donation Per Year	£100	£200	£300	£400	£500
22% basic tax rate (22/78th)	0.28	0.28	0.28	0.28	0.28
The tax charities can reclaim	£28.21	£56.41	£84.62	£112.82	£141.03
Total Amount Received	£128.21	£256.41	£384.62	£512.82	£641.03

Example 2: Basic Rate 40% tax payer  

Charitable Donation Per Year	£100	£200	£300	£400	£500
40% basic tax rate (40/60th)	0.67	0.67	0.67	0.67	0.67
The tax charities can reclaim	£66.67	£133.33	£200.00	£266.67	£333.33
Total Amount Received	£166.67	£333.33	£500.00	£666.67	£833.33

Find out how much you could save with a Payroll Giving calculator (see right-hand side)

Payroll Giving - Your Questions Answered
Payroll Giving - Success Stories

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Gifts of land, buildings, shares and securities
Since April 2002, individuals have been able to receive income tax relief on gifts to charities of certain land, buildings, shares, securities and other investments.  Gifts to charities under this scheme are free of capital gains tax.  This is a great way to give to charities if you have exceeded your capital gains allowance for the year (£8,800 for 2006/7) and wish to maximise your charity donations.  

To make a gift of shares or securities, you need to sign a transfer form to take the shares out of your name and put them into the name of your charity.  You can get the transfer form by contacting the registrars of the company (of the shares or securities). Their details will be on your share certificate and on your dividend vouchers. The registrars will be able to answer any questions about filling in the form.

Example

You give a registered charity shares worth £1,000. The cost of the shares to you for capital gains tax purposes is £0. If you had sold the shares yourself, you would have received £1,000 but paid £400 capital gains tax (at 40% and assuming no taper relief or annual exemption), and been left with £600.

(Taper relief is a relief for capital gains tax which varies with the number of years that has passed since the commencement of ownership.)

By giving the shares to the charity instead, you would receive the following tax relief.

Capital gains tax	40% of £1000 = £400
Income tax	40% of £1000 = £400
Total	= £800

In this case, the total saving is £800. This means that a gift with an effective after-tax cost to you of £200 would be worth £1,000 to the charity, and that is the size of the gift you would be recognised for. This example, which ignores any broker's fees, gives the maximum tax relief.

It is also possible to benefit both the charity and the donor by selling shares or land under value. The amount of the undervalue is treated as the amount of the gift and the tax relief described above that can apply to this amount.

Another approach is to give your shares to Sharegift.  This is a registered charity that specialises in helping donors give shares to charity. They accept any number of shares, however small, and collect them until there are enough to sell. They make donations to charities that have been suggested by share donors. Sharegift does not charge for this service. 

If you are a children's charity (or are involving children's welfare) and would like to send us some more information on how we might be able to join or promote your cause, please email us.  

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