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5 great ways to help a charity you care about this Christmas

26th November 2021

As the festivities approach, you might be one of the many people who would like to make a seasonal gift to a charity or good cause that’s close to your heart.

If you are, doing so could not only benefit the organisation you’re thinking of giving money to, but  also benefit you. That said, you may also be thinking of other ways you could help the charity, such as giving them your time.

Read on to discover five ways you could help a good cause both now and in the future, and how doing so might make you more tax-efficient.

1. Donate from your earnings

Giving while you’re alive could provide a win/win for you and the charity you’re looking to support.

One way you could “give with a warm hand” could be to donate directly from your earnings. If you’re working, you could donate directly from your monthly pay packet using an employer “Give as you Earn” scheme.

This allows you to donate from your pre-tax earnings, meaning your £100 donation would actually cost you £80 as a basic-rate taxpayer, £60 as a higher-rate taxpayer, and £55 as an additional-rate taxpayer.

2. Donate while purchasing

If you give money via Gift Aid, your chosen charity could claim back the basic rate of tax you paid on the money donated. That means every £1 donation you make is worth £1.25 to the charity or community amateur sports club (CASC).

Remember that you will typically have to complete a Gift Aid declaration form.

As a higher- or additional-rate taxpayer, you can also claim the difference between the rate of tax you pay and the 20% basic-rate tax relief your donation received.

This means that if you donate £100 to charity as a higher-rate taxpayer, Gift Aid will increase your donation’s value to £125. You can then claim the difference through your self-assessment tax return so that you can claim back 20% of £125 (in this case £25).

3. Donate assets not money

Donating land, property, or shares to charity while you’re alive means you can see the benefits it provides.

It also means you could benefit from not having to pay Capital Gains Tax (CGT) on the assets you donate. Ordinarily, if you were to sell shares, land or property that’s not your main home, you pay CGT on any profit you make over and above the £12,300 allowance you’re allowed (2021/22).

CGT is charged at between 10% and 28% depending on the type of asset and the amount you earn.

4. Give when you die

According to the Telegraph, in 2019 people left more than £3 billion in their wills to good causes.

There are several ways to leave money to charity through a legacy. As well as supporting a cause you care about, it’s tax-efficient too, as the amount you donate typically falls outside of your estate for Inheritance Tax (IHT) purposes.

This could help you reduce your exposure to IHT, which is typically charged at 40%. If you donate more than 10% of your estate that would otherwise be liable to IHT, the rate reduces to 36%.

Remember, depending on your circumstances you will typically be allowed to have between £325,000 and £1 million in your estate before IHT will be due. The following are the three main types of legacy gifting:

Residuary legacy

This is when you leave some or all of your estate to your chosen charity once all other bequests have been made and costs and debts have been cleared.

Pecuniary legacy 

Probably the easiest and most common way of donating to charity, as it allows you to gift a specific sum of money to your chosen charity from your will.

Specific legacy

Instead of cash, you may instead want to leave a particular item to your chosen charity. If you do want to do this, it must be clearly stated in your will.

Gifts, and willed amounts, make a huge difference to the charity you support.

Charitable gifts and donations aren’t liable for IHT so could be used to lower the value of your estate and lessen the IHT impact for those you leave behind.

5. Volunteer your time

In addition to helping financially, you may also want to give your time to help the charity of your choice.

This might be helping in a shop, fundraising, driving or carrying out various types of manual work. As well as helping the organisation and those it works to support, it could introduce you to a whole new social group that may help enrich your life.

If you are interested in volunteering, you can find more information on the government’s volunteer page.

Get in touch

If you are considering making a gift to a charity and would like to discuss how it could help your tax situation, please feel free to email us on info@harperlees.co.uk or call 01277 350560.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

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

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