Tax Effective Giving

If you are a UK taxpayer or business, there are a number of ways to give tax efficiently. Wise donors can take advantage of tax incentives designed to encourage more giving to charity.

Those based overseas may also be able to donate tax effectively.

Advice and information

You can get advice and information about making gifts to charity from HM Revenue & Customs.

A summary of key information for individuals is set out below. We recommend that you get advice from your professional advisors before making any gift.

HM Revenue & Customs

Tax-efficient giving for individuals

Gift Aid

Gift Aid enables charities you support to get extra money on your donation without it costing you a penny more. To make a Gift Aid donation, you must be a UK taxpayer. Your donation is treated as if basic rate income tax had been deducted: charities can therefore reclaim that tax from HM Revenue & Customs (HMRC).

For example, on your donation of £10,000, we can claim £2,500 in Gift Aid, meaning your gift total will be £12,500.

Tax relief for higher rate taxpayers

If you pay tax at the higher rate, you can claim back the difference between the higher rates of tax (40% or 45%) and the basic rate (20%) on the total value of the donation.

For example, if you pay the 40% rate, a donation of £10,000 allows you to recover £2,500, so the donation costs you only £7,500 net, but the Community Foundation receives £12,500. If you pay the 45% rate, a donation of £10,000 allows you to recover £3,125, so the donation costs you only £6,785 net, but we receive £12,500.

Giving in your will

If your estate is liable to Inheritance Tax you could choose to leave the money to charity to reduce the overall amount of tax due from your estate. You could either leave a fixed sum (known as a ‘Pecuniary Legacy’) or part of all of your estate once other gifts have been distributed (known as a ‘Residuary Legacy’). You can do this through your will, or simply by a declaration to the executors giving instructions as to how, and to which charity your legacy is to be distributed. Gifts made to a UK charity in the seven years prior to your death are also covered by the same exemption from Inheritance Tax. Your personal accountant or solicitor will be able to advise on the best option for you.

From 6 April 2012, if you make a gift in your will to charity of at least 10% of your net estate, the rate of inheritance tax due on the taxable part of the estate is reduced from 40% to 36%.

HMRC Inheritance Tax Calculator

Gifts of assets: land, buildings, shares etc.

Individuals can get tax relief on gifts to charity of certain listed shares, securities and other assets. You can get income tax relief, in addition to the capital gains tax relief on gifts of assets to charity. The tax relief applies if you give, or sell at less than market value, any qualifying investments to a UK charity.


Companies

If you are a company looking to make a donation to Two Ridings CF, you may be eligible for tax reliefs similar to those for individuals. We would be happy to work with your professional advisors to optimise the tax effectiveness of your donation.