Tax Help Section

Give More To Charity - Use The Generous Tax Relief On Offer

October 2005

Most people who give to charity fail to use the generous tax allowances that are on offer from HM Customs & Revenue. Getting tax-relief is simple to set up, there are few if any forms to fill out, and it can give a real financial boost to the charity in question adding up to 22% on top of any money you pledge.

How Does Charitable Tax Relief Work

• Charitable tax relief works mainly through a government initiative called gift Aid
• If you tick the box labelled Gift Aid on any donation form the charity will be able to reclaim 22% on the amount you pledge
• For example, if a lower rate taxpayer donates £78 the Charity will be able to reclaim £22 Via Gift Aid

Not using tax relief is therefore financially inefficient for both sides, especially the charity.

• From November 2005 the government is making it easier for charities to use the power of gift aid and is letting them use the initiative even on the telephone
• As you can see there is virtually no paperwork or forms that the donor has to be concerned with, and the government now makes it far easier for charities to reclaim this type of money as well

Higher Rate Tax Band Bonus

For higher rate taxpayers Gift Aid can either cut their personal tax bill or give the Charities another financial boost.

Higher rate taxpayers can reclaim the 18% difference between the tax bands and either use this to reduce their tax bill or pay more in donations to the charity. If you pay tax at the higher rate and give money to charity then not using the benefit of gift aid is a serious mistake.

A further nice feature of Gift Aid is that once you are registered as a Gift Aid donor the charity in question will automatically be able to use the benefits of reclaiming monies already paid in tax.

What Is A Charity Account

• A Charity Account is similar to a bank account and it is held with the Charities Aid Foundation (CAF)
• Basically you pay your money to your Charity account and are then free to write cheques or use the gift card (like a credit card for charities) to pledge money to the charity or charities of your choice
• The account can be funded by one-off payments or on a regular basis via direct debits
• Money can then be pledged anonymously if you so choose
• Of course full tax relief can also be claimed and the nice feature is that tax relief is claimed when payments are made into the account and not when you actually make a donation
• For example, you may well pay £500 into your Charity account on which tax relief is claimed
• However you actually pledge the money nine months later

Summary

Tax relief towards charities can be a seriously powerful generator of extra income in the charitable world. If you give money to charity please look to see if you can help them some more by following the simple advice and strategies listed above.

See Also

• Free guide on tax-efficient charitable donating - Call the Charities Aid Foundation 0970 160 1300
• Charity Accounts or call 01732 520 050