The tax rules for charitable giving

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    Many people choose to support causes that mean a lot to them, whether on a regular basis or as a larger one-off donation. We’ve looked into the ways you can make your donations go further by making the most of charitable giving tax rules.

    How can you make charitable donations?
    If you’re thinking about making a financial charitable donation that is a little larger than change in a charity bucket, there are a number of ways to do so.

    You could decide to donate through Gift Aid; through your workplace or pension Payroll Giving Scheme; or through your will. A donation given in this way is tax free. How the tax relief is given – either to you or the charity – depends on the method you choose.

    It is best to keep a record of your charitable donations in order to claim tax relief.

    How can you donate through Gift Aid?
    Gift Aid allows charities and Community Amateur Sports Clubs (CASCs) to claim an extra 25p on every £1 that you donate at no extra cost to you. Charities are permitted to claim Gift Aid on most donations made to them.

    If you would like to add Gift Aid to your donation, you will need to make a separate declaration for each of the recipient charities, on a form that they can provide. You can include Gift Aid on any donations made in the past four years.

    You will need to inform the charity about any tax years you did not pay enough tax. Your donations will only qualify as long as they are not four times what you have paid in tax during that tax year, paid through income or capital gains tax.

    There are further rules for those on a higher rate of tax, or if you would like to receive your tax relief for the current year. It is best to consult the Government guide to Gift Aid for more information.

    How do Payroll Giving schemes work?
    If you choose to be part of an employer or pension provider’s Payroll Giving scheme, you make donations before Income Tax is taken on your earnings. You will still be required to pay National Insurance on the donation, but you will be exempt from paying Income Tax on that amount.

    The tax relief you will receive through the scheme depends on the rate of tax that you are paying, and on where you live in the United Kingdom. You can find further details in the Government website’s guide to donating to charity.

    How can you make a charitable donation through your will?
    When writing your will, you can donate a fixed amount, an item, or the remainder of your estate to a charity of your choice after other gifts have been distributed. The amount you donate will either be left out of the calculation of your estate value before Inheritance Tax, or reduce your Inheritance Tax rate if more than 10% is donated to charity.

    If you are planning to donate to a charitable organisation or a Community Amateur Sports Clubs (CASC) through your estate and you decide to leave the entirety of your assets, this will be exempt from inheritance tax. This means that your chosen charity will receive the full value of your estate.

    Find out more about inheritance tax on gifts 

    How to gift a charitable donation to another person
    If you’d like to make a gift of a charitable donation to another person, there are several ways to do so.

    You can “buy” a gift through a charity; for example, buying a mosquito net through Save the Children, or a Christmas dinner for a homeless young person through Centrepoint. These donations can be made in the name of another person.

    For charities such as those caring for animals, you can “adopt” an animal in someone else’s name; for example, you can gift the adoption of an endangered elephant for WWF. For something a bit closer to home, you could gift the sponsorship of an animal at a local sanctuary.

    How can you donate safely?
    To avoid any fraudulent scams, it is best to check whether the charity you plan to donate to is on the Government’s registered charity list for England and Wales, Scotland and Northern Ireland. These do not include charities with an income of below £5,000; those that have chosen to be excepted, such as a church, school, Scout or Guide group, or an armed force charity; or are exempt from reporting to the Charitable Commission.

    You can check which community amateur sports clubs, or CASCs, are eligible through the Government listings. It is important to be aware that you cannot donate to a CASC through a Payroll Giving Scheme.

    If you are approached to make a charitable donation, it is perfectly acceptable to ask for more information, or to make a donation at a later date after you have done some independent research to consider your support for that particular charity.

    How else can you support charities?
    Of course, charitable giving is not all about financial donations. There are plenty of ways to give your time, your expertise, your spare gifts and other items, and plenty more. Giving is completely personal, and every donation – monetary or otherwise – is gratefully received.

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