Charitable donations (a.k.a when you give money to charity) are tax-free in the UK. If you choose to donate, you can claim tax relief on it.
If you give money directly, in most cases charities can claim Gift Aid – the basic rate of tax on income (20%). Higher rate taxpayers pay 40% tax and can claim the difference between the rate they pay and the basic rate on their donation. Claiming tax relief through Gift Aid can be done through a Self Assessment tax return or by asking HMRC to amend your tax code.
If you donate land, property, or shares, you can claim both Income Tax relief and Capital Gains Tax (CGT) relief. You usually have to pay CGT when gifting assets. This is done either through a Self Assessment tax return or by calling HMRC. They will either send you a cheque or change your tax code.
If you donate through your will, the value of your donation will be taken off the value of your estate. This means that your beneficiaries pay less Inheritance Tax (IHT). If you leave more than 10% of your estate to charity, the rest will also be subject to a reduced IHT rate of 36% instead of 40%.
Of course! We advise that you start a comprehensive spreadsheet to keep track of your taxable income and relevant expenses throughout the year in order to make your tax return more straightforward. This can be done on an Excel spreadsheet or Google sheet to keep things simple! Contact our team for more advice today!
Inheritance Tax is paid by the beneficiaries of your will. To learn more, visit our glossary page for Inheritance Tax.