Simple ways to donate to charity and reduce your tax bill

20 August 2024

Simple ways to donate to charity and reduce your tax bill

Three-quarters of the UK population donated to charity in 2023, according to data from the Charities Aid Foundation (CAF). Donations from generous Brits totalled £13.9 billion over the course of the year[1].

While the sum most often donated to charity is £20, CAF report that roughly 1 million people are “super givers”, meaning they donate, sponsor, volunteer, fundraise, and give goods[2].

Whether you’re already giving generously or are thinking of doing so, read on to find out four different ways make donations and how they could provide tax-efficient benefits.

1. Give to charity directly through your salary

One of the easiest ways to pay a regular charitable donation is to pay directly from your salary, using a Payroll Giving Scheme.

Check with your employer or pension provider if this option is available to you. If it is, the scheme (sometimes called “give as you earn” or GAYE) allows you to make donations directly from your income. And you could benefit from Income Tax relief at your marginal rate.

For example, to donate £10 to charity, you’d pay:

£8 if you’re a basic-rate taxpayer
£6 if you’re a higher-rate taxpayer
£5.50 if you’re an additional-rate taxpayer

Because payments are made directly from your employer, it’s relatively easy to maintain regular contributions.

2. Gift Aid could mean you can claim Income Tax relief

Using Gift Aid, charities and community amateur sports clubs can claim 20% of the pre-tax amount you earned to pay the donation. For example, if you’re a basic-rate taxpayer and donate £100, the charity will ultimately receive £125.

Since your donation is likely to come from your post-tax income, you can also use Gift Aid to reclaim Income Tax. If you’re an employed higher- or additional-rate taxpayer, you can claim further tax relief through your self-assessment tax return.

Plus, if you earn £100,000 or more, using Gift Aid may help you restore a portion of your lost Personal Allowance. As a result, donating through Gift Aid may allow you to keep more of your Personal Allowance and claim tax relief, potentially reducing your Income Tax bill. Get in touch if you’d like to learn more.

3. Leave a charitable legacy to reduce an Inheritance Tax bill

Depending on the value of your assets, your estate may be liable for Inheritance Tax (IHT) when you pass away, meaning your loved one might end up with less than you’d hoped.

Leaving a charitable legacy could help a cause you care about and reduce the amount of IHT due.

There are two ways this could reduce the amount of IHT you owe:

Anything you leave to charity will be taken off the value of your estate before IHT is calculated. This could help you keep your estate under the threshold limits, meaning your estate won’t be liable to pay any IHT.
At a standard rate of 40%, IHT could significantly reduce the legacy left to beneficiaries. However, leave 10% of your estate, or more, to charity and the rate of IHT will fall to 36% (2024/25).

To leave a charitable legacy and reduce IHT, you must declare your intentions in your will. This could be:

A fixed sum
Anything left over after bestowing other gifts
An item from you estate – artwork, for example
A percentage of your estate.

These are just a few of the ways you could potentially reduce an IHT bill on your estate. Another popular option is to give a living inheritance to your loved ones.

4. Gift money to your loved ones during your lifetime

There are a number of gifting strategies that could help you create a tax-efficient plan to pass wealth down through the generations.

We can help you understand all your options and set up an estate plan that works for you and your beneficiaries.

Get in touch

If you’d like to learn more about the potential tax benefits of supporting good causes, please get in touch.

Email info.wp@titanwh.com or call us on 0800 048 0150.

Please note

The information contained in this article is based on the opinion of Titan Wealth Planning and does not constitute financial advice or a recommendation for any investment or retirement strategy.

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.

[1] https://www.cafonline.org/insights/research/uk-giving-report

[2] https://www.cafonline.org/insights/research/uk-giving-report

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Titan Asset Management Limited is authorised and regulated by the Financial Conduct Authority. Titan Asset Management Limited is a wholly owned subsidiary of Titan Wealth Holdings Limited. This content is for financial intermediaries, it is not aimed at the general public. This document is published and provided for informational purposes only. The information contained within constitutes the author’s own opinions. Titan Asset Management Limited do not provide financial advice. None of the information contained in the document constitutes a recommendation that any particular investment strategy is suitable for any specific person. Source of data: Bloomberg, Titan Asset Management unless otherwise stated. Registered address: Titan Asset Management, 101 Wigmore Street, London, W1U 1QU.