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:

  • £40 as a basic-rate taxpayer
  • £30 as a higher-rate taxpayer
  • £27.50 as an additional-rate taxpayer

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.

  • Income Tax relief – You can deduct the value of your donation (of land, property, or shares) from your total taxable income, thereby lowering the Income Tax you pay. This can be done via your Self-Assessment tax return or by writing to HMRC. You’ll need to include details of the gift or sale and your tax relief amount.
  • Capital Gains Tax relief – If you donate land, property, or shares to charity, you’ll likely not have any CGT to pay. If you sell them for more than they cost you, but less than their market value, there might be a tax liability. The gain is based on the amount you receive from the charity, not the value of the asset.

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%.

5. Volunteering

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

Please note

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.