The tax breaks for giving to charity

There are a wide range of tax reliefs available for charitable giving, however, to obtain them, the charities must be registered.

Gift Aid: The scheme provides relief for gifts to charity and community amateur sports clubs. Gifts must be made by UK taxpayers and the donor must complete a Gift Aid declaration. The gift is treated as being made net of the basic rate of income tax and the charity reclaims the basic income tax from HMRC.

If the individual is a higher or additional rate taxpayer, relief on the difference between the basic rate and the higher or additional rate, as appropriate, is reclaimed via the Self Assessment tax return.

Payroll giving: Employees can make gifts to charity through the payroll and the donations are deducted from gross pay. As a result, tax relief is given at source.

Shares and securities: Income tax relief is available for certain gifts of shares and securities to charities. This extends to shares and securities listed on a recognised stock exchange or on the Alternative Investment Market, shares in an authorised unit trust, open-ended investment company and certain collective investment schemes.

Relief is given on the market value at the time they are given or sold to the charity, plus costs of disposal, less any consideration received. Relief is claimed via the Self Assessment return.

Gifts of property: Income tax relief is also available for certain gifts of land and buildings. As with shares, relief is given on the market value plus incidental costs of disposal less any consideration. It can be claimed via Self Assessment.

Reduced inheritance tax: A reduced rate of 36 per cent will apply where 10 per cent or more of the deceased’s net estate (after deducting IHT exemptions, reliefs and the nil rate band) is left to charity.

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