Charity Giving Pay less (or nowt) give more!

If you 'do a lot for charidee', force the tax system to help and you can 'do a liddle more.' This article tells you how to give up to 80% more to charity than you pay.

Jump to

• Gift Aid
• Payroll Giving
• An Easy Method
• Sharing the Wealth

Any charity registered with the Charity Commission, or the Office of the Scottish Charity Regulator (small charities and ones based in Northern Ireland register with HM Revenue & Customs instead for charitable tax exemption) can take advantage of schemes allowing them to reclaim your tax.

It's easy to find out as it'll have 'registered charity' on its literature, plus organisations like churches, universities, amateur sports clubs and some schools and hospitals automatically have charitable status.

Maximise your giving, Minimise your cost

The simplest way to give is via 'Gift Aid'. This allows charities to claw back your tax from the Inland Revenue on either one-off or regular donations. There's no minimum contribution so even on a pound the tax is reclaimable.

All the charity needs is your name, address and a declaration that you're a UK taxpayer. As this can be verbal it can even be done over the phone.

How does this benefit you and the charity?

Charities reclaim the tax at the basic 20% rate, which due to the way the numbers work means they get 25% more than you donate (e.g. you give £50, the charity gets £62.50).

Any higher rate (40%) or additional rate (50%) taxpayers are able to reclaim the difference between the basic and higher rates (i.e. 20 or 30%) on top of this.

For higher-rate taxpayers, on £50 that's another £12.50 (so £25 in total). However, the tax self-assessment form does also include a note of charity gifts so higher rate taxpayers can choose to donate this extra tax to charity too.

To claim that cash, either declare it on your tax return, or if you don't fill one out, complete a P810 form, available from your local tax office.

Payroll Giving

'Payroll giving' lets you donate a regular amount directly from your salary, through your employer's payroll. The donation is given before tax is taken off, so the charity automatically gets more, regardless of what level of tax you pay.

The only problem is employers must have a scheme in place: you can't just do it on your own. Ask your human resources department if your firm runs a scheme. If not it's worth trying to encourage it. This is a simple process run through the automated payroll. The Association of Payroll Giving Organisations (APGO) may be able to help.

Unfortunately those who are self-employed sole traders can't access payroll giving.

Feed the starving at no cost to you

There is a way to help at no cost. Sites like thehungersite.com work by sponsorship. You go to the site, click the link, and the sponsors pay for food to be donated to someone who is starving. There are other similar sites which donate to various causes. Read Feed The Starving At No Cost To You.

Get a charity chequebook

One final tip. Both The Charities Aid Foundation and Charities Trust run special charity accounts, that let you pay money in directly through either Gift Aid or Payroll giving, where the tax is automatically collected and added it to your account.

After this you can use a special chequebook to donate from your account, or make payments online, to a charity of your choice. The big advantage is you can donate tax-efficiently on impulse, even putting the special cheques in collection tins to ensure the charity gains the maximum amount.

Tax breaks can make a real difference to the size of donations. To give £20 using the gift aid scheme a basic rate taxpayer would only need to give £15.60, a higher rate taxpayer just £13.33 (assuming the extra tax is donated to charity too). Overall this means to give a charity £240 in a year, it would only cost a higher rate taxpayer £160.

The solid chink when you pop a few pennies in the charity bucket still provides well-needed donations. However, if you're planning to do your bit, taking advantage of these tax benefits should turn that solid chink into a solid chunk of cash.

Donate your old shares

Donating shares to charity is a less obvious way of giving but there are tax benefits here too. Sign over your shares to charity and there's no capital gains tax and you can offset their value (on the day you transfer) against income tax.

There's a number of ways this can be beneficial:

Perhaps you've a shareholding so small it's not worth selling. Or it can be a useful way to give if you've used up your capital gains tax limit (you can make up to £10,600 of one-off gains a year before tax is applicable), you want to offload some shares and the income tax write off means you get a double hit tax benefit.

The transfer form itself works as a record of the transfer and the responsibility of selling the shares moves to the charity, which can wait until it builds up a bigger portfolio to cut down stockbroking costs.