The coronavirus pandemic has left one in ten charities facing bankruptcy by the end of 2020.
Since the start of the year donations have dropped, shop takings have decreased, and fundraising events have been cancelled, postponed, or downsized. All have a knock-on effect for the charities involved.
The Guardian points to the London Marathon as the ‘largest single-day fundraiser in the calendar.’ Responsible for raising £66 million for a variety of worthy causes in 2019, it raised less than a quarter of that amount this year.
Here are five ways you can make a tax-efficient donation to a struggling charity this winter.
1. Giving from earnings
If you want to make regular, hassle-free donations to charity, consider giving directly from your earnings.
A payroll giving scheme allows you to donate money to charity from your pre-tax pay.
You can only do this through your employer so check whether they run a ‘Give as you Earn’ scheme. The most popular is the Charities Aid Foundation (CAF) scheme which currently gives more than £74 million to charity every year.
If your employer does operate such a scheme, you’ll get tax relief on the donation based on the rate of tax you pay.
A £50 donation would cost you:
2. Giving through purchases
If you give to a good cause as a UK taxpayer, your chosen charity can reclaim the basic rate of tax you paid on that donation. This is known as Gift Aid.
You’ll usually have to complete a Gift Aid declaration form, but once you do, every £1 donation you make to a charity or community amateur sports club (CASC) is worth £1.25 to your chosen charity.
If you pay above the basic rate of tax, you can use your Self-Assessment tax return to claim the difference between the rate you pay and the basic rate on your donation.
Put another way:
Donate £100 to charity as a higher-rate taxpayer and Gift Aid makes your donation worth £125. The difference between your rate of tax and the basic rate is 20% (40% minus 20%). You can therefore claim back 20% of £125, or £25.
3. Donating (or selling) land, property, or shares
Donate land, property, or shares to charity and you can receive tax relief on both Income Tax and Capital Gains Tax (CGT). The reliefs exist even if you sell your assets on the charity’s behalf, for less than market value.
4. Leaving a charitable legacy
Adding a charitable legacy to your will is something you can do now to help a charity in the future.
You can leave your estate (or a percentage of your estate), gift a specific sum on your death, or donate individual items to the charity of your choice.
All bequests must be stated in your will so if you do not have one, or it needs updating, make that a priority and support a cause close to your heart.
There are tax benefits too.
The gifted amount does not count towards the value of your estate for Inheritance Tax (IHT) purposes. Also, if you donate 10% or more of your estate to charity, the IHT rate for those you leave behind drops from 40% to 36%.
Saturday 5th December marks this year’s International Volunteer Day. It remains to be seen whether UK restrictions will allow charity shops to open for this year’s event, but why not make volunteering a New Year’s resolution.
In a 2019 CAF report on charitable giving, one in six Brits confirmed that they had volunteered in the last year.
You can volunteer in many ways and you can donate more than just your time. If you have professional qualifications or expertise in an area a charity needs, consider volunteering your knowledge for free.
Get in touch
It’s been a difficult year for charities. If you’d like to help a cause you care about, there are plenty of ways you can make a tax-efficient donation. Please get in touch if you’d like to discuss gifting or estate planning, or any aspect of your long-term financial plans
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
“At Boolers, you know that things will be dealt with properly and professionally. A real safe pair of hands!”
“I have always found the quality of advice, technical knowledge and level of service is second to none. ”
“Thank you to all of you for such a wonderfully smooth transaction! Hope we can do it again some time.”
“Boolers provided excellent advice when we needed it most.”
“Boolers have provided myself, family and business with pension and investment advice for over 30 years and continue to provide a high quality professional service to us all on an ongoing basis.”
“Chris Ball has been our Financial Adviser for many years and, from the start, we have been impressed with his strategic sense, his deep knowledge and his skills in helping us build our own successful retirement. He understands our aims and how to achieve them and has taken great care of us throughout. ”