Tax & Giving Fact Sheet: the benefits for you and your causes

Below is a quick overview on how UK tax works around charitable giving and some tips on how doing good can reduce your tax bill at the end of the financial year.

Gift Aid when you’re a higher-rate taxpayer

When you give money to a charity, they can claim an extra 25% of the amount you donate from the government if you are a UK taxpayer.

If you’re a higher-rate taxpayer, you can also claim back the difference between the tax you’ve paid on the donation and the amount the charity received.?

For example...?

• Your donation: ￡100.00
• Total contribution after charity has reclaimed tax: ￡125.00
• If a higher-rate taxpayer, you can reclaim additional tax of: ￡25.00
• If a top-rate taxpayer, you can reclaim additional tax of: ￡31.25

In this example, the charity receives ￡125 but the donor only ‘spends’ ￡75 or ￡68.75 depending on their tax bracket.

This is because if you pay tax at a higher rate (40% or 45%), you can claim back the difference between the higher rate of tax and the basic rate of tax on your donation.

Giving shares

You can get both Income Tax and Capital Gains tax relief on any shares you donate to charity...

You do not have to pay any?Capital Gains Tax?on shares you give to charity.

You can also sell them to the charity for less than their?market value. The charity can then sell them on and benefit from the difference. Work out your gain based on what the charity pays.

How Income Tax relief works

Donating either money or shares to charity means you pay less Income Tax by deducting the?value of your donation?from your total?taxable income.

This applies for the tax year (6 April to 5 April) in which you made the gift or sale to charity.

If you complete a?Self Assessment tax return, add the amount you’re claiming in the ‘Charitable giving’ section of the form. This will reduce your Self Assessment tax bill.

If you do not complete a tax return,?contact?HMRC?with details of the gift or sale and your tax relief amount. You’ll either get a refund, or your tax code will be changed so you pay less Income Tax for that tax year.

Give from your pay

Donations in your pay are taken from your salary before tax is deducted. This means your donation costs you less.

You will need to inform your employer that you would like to donate using their payroll giving scheme.

The tax relief you get depends on the?rate of tax you pay. To donate ￡1, you pay:

• 80p if you’re a basic rate taxpayer
• 60p if you’re a higher rate taxpayer
• 55p if you’re an additional rate taxpayer

For more details, see the government guidance on?payroll giving.

Leaving money in your will

If you leave money to a charity in your will, the donation will either:

• be taken off the value of your estate before inheritance tax is calculated, or
• reduce your inheritance tax rate if more than 10% of your estate is left to charity

You can donate:

• a fixed amount
• an item
• what’s left after other gifts have been given out

For more support on the practicalities of giving, one of the Raise Your Hands team will be happy to help. Email [email protected]