We all want to receive greater tax efficiency out of our charitable giving; both for the charity, and for us. There are three main ways in which you can make tax efficient charitable donations with either you or them being able to claim tax relief on your donation, these being when you:
- declare (using an appropriate form) that you would like Gift Aid to be added to your donation,
- donate through a Payroll Giving scheme set up by your employer, and
- donate land or certain shares to a charity that agrees to accept your donation.
Gift Aid is the simplest, and most common, way in which individuals and businesses alike can make tax efficient donations to charity. If you’re a British taxpayer, the Gift Aid scheme allows the charity you’re donating to to reclaim basic rate tax on your donation from HM Revenue and Customs (HMRC), thus increasing the overall value of your donation.
Your donation will only qualify for gift aid if you:
- pay at least as much income tax in a given tax year as the charity (or charities) will reclaim (if you don’t pay income tax, you cannot take advantage of the Gift Aid scheme),
- don’t receive excessive benefits, in any form, for your donation,
- make a Gift Aid declaration (using an appropriate form) that you would like Gift Aid to be added to your donation.
It should be noted that Gift Aid donations can be backdated up to four years. As we wrote in this article from last year, “It’s been suggested that the current declaration form doesn’t make the link between the tax the individual making the donation has already paid and the Gift Aid that can be claimed by the charity they’re donating to; something the upcoming improvements are sure to address.”
Donating to charity through a Payroll Giving scheme is a great way to give to charity every time you’re paid by your employer.
In order to make a gift to charity through a Payroll Giving scheme your employer must have already set up the scheme with their business, and you must authorise your employer to gift a certain amount from your pay every month (or however often you’re paid) to a Payroll Giving agency that’s been approved by HMRC. It’s this agency that will then send your gift on to your chosen charity (or charities).
The main benefit of donating to charity through your employer’s Payroll Giving scheme is that your donation is deducted from your pay before the tax you owe is worked out: therefore you receive immediate income tax relief at your current (basic, higher, or additional) tax rate.
For more information on payroll, click here.
Donating Land, Shares
If you decide you’d like to donate land or certain shares to charity, the first thing you need to do is contact the charity (or charities) in question to make sure they are able to accept your donation.
Next you’ll have to ensure that the land or shares you’re looking to donate qualify for tax relief. This is where you’ll want to speak with your accountant in relation to your specific circumstances, but in general the following donations qualify:
- freehold interests in land,
- leasehold interests in land (so long as the lease period is for a term of years absolute),
- shares and securities listed or dealt on the British stock exchange, or recognised overseas stock exchanges,
- holdings in recognised foreign collective investment schemes.
Keep in mind, if you donate any land to a charity it’s essential that they present you with a certificate proving that they have acquired the land from you in order for you to receive tax relief.
Experienced Tax Accountants
To speak with a professional accountant to discuss how you can make tax efficient charitable donations, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.