Efficient Giving

By Indyana Schneider

I’ll start by saying this post is less artistically focused than usual, but hopefully informative all the same.
No I won’t. It’s never good to start with a disclaimer. Let’s try again.

I’ll start with some fun facts:

  1. Most people (61%) have donated to charity in the last year
  2. 17% of all donations in 2016 were made using a mobile device
  3. The top 20 countries for charitable giving vary economically, geographically, and politically – the list includes countries like Qatar (second highest GDP per capita) and Liberia (second lowest GDP per capita)

Despite recent political shocks, the historic scale of the refugee crisis and the steady flow of disturbing stories which have dominated headlines, so far, public charitable giving seems not to have been impacted. The dependable and enduring generosity of people in the UK in their support of good causes remains unwavering. Thank you.

There are some key points to consider when giving to a charity like OperaUpClose, which many people aren’t aware of. So, after doing a little digging, I’ve put together some information FYI.

The main thing to take away from all this: All gifts to charity are exempt from tax.

Firstly, you might want to consider two main points when it comes to tax-efficient giving:

  1. Is my chosen charity eligible for tax deductions / Gift Aid?
  2. How can I reduce my own tax bill by donating?

Another point I’ll stress: Being savvy about how you donate really can increase the value of your donation substantially! So do read on!


Gift Aid

The UK government introduced the Gift Aid scheme to support registered charities, who are able to reclaim income tax so as to boost the value of donations made. So if you’re a UK tax payer, you can ‘Gift Aid’ your donation, meaning we can claim an extra 25p for every £1 you give, without it costing you any extra.

  • Another fun fact: in the 21 years since Gift Aid was introduced, registered charities have garnered an additional £12 billion in tax reclaims on donations in the UK.
  • Another less fun fact: Charities Aid Foundation (CAF) estimates that an additional £750 million of potential tax reclaim benefit goes unclaimed each year.

If you’re unsure whether OperaUpClose is claiming Gift Aid on your donation, please get in touch.


Tax Relief

All gifts to charity are exempt from tax.

If you pay tax at the higher or additional rate, you can claim the difference between the rate you pay and basic rate on your donation. You can do this through your Self Assessment Tax Return or by asking HMRC to alter your tax code.

So let's say you donate £100 to OperaUpClose - we claim Gift Aid to make your donation £125 (thank you). The basic rate of income tax is 20%, so if you pay 40% tax, you can personally claim back £25.00 (£125 x 20%) on your £100 donation.

Easier still, with Payroll Giving, you don’t pay the difference between the higher and basic rate of tax on your donation.


Payroll Giving

Payroll giving, if offered by your employer or pension provider, is an easy way to increase the value of your donation because your donation is deducted from your gross salary BEFORE tax. So, you don’t pay tax on it in the first place.

Your tax relief depends on the rate of tax you pay. To donate £1, you pay:

  • 80p if you’re a lower rate taxpayer
  • 60p if you’re a higher rate taxpayer
  • 55p if you’re an additional rate taxpayer

Your best bet is to ask your employer or pension provider if they run a payroll giving scheme.

While you’re thinking about your employer, a lot of people don’t know that some corporates have policies which dictate that if an employee donates to a non-profit, their corporation will donate money to the same non-profit according to a predetermined ratio (usually 1:1). Definitely worth investigating.


Keeping Records

All of my research stressed the importance of record-keeping, so it’s probably best to mention that here. In order to access the full benefits of tax relief on charitable giving, it is essential to keep detailed, up-to-date records of all your donations to charity.


Legacy Giving

Another way to give, which is growing considerably in popularity, is by leaving a legacy in your Will. An important tax issue to consider when thinking about your Will is inheritance tax - everything above £325,000 will be taxed at 40%. However, if you leave 10% of your estate to charity, you receive 10% off inheritance tax!

You can find out how to leave a legacy to OperaUpClose here.