According to the Charities Aid Foundation’s latest report, around £9.7bn was given to good causes in the UK in 2016, and more than half of those people who donated money gifts reported using Gift Aid.
Gift Aid, then, is a crucial facilitator for charities, but it is also an important income tax relief for individuals giving to charity.
However, there are other tax reliefs available to donors which should not be overlooked.
HMRC’s provisional charity tax relief statistics show the amount of higher and additional rate tax relief claimed by individuals on their Gift Aid donations in 2016-17 was £520m.
The Gift Aid tax repayments claimed by charities totalled £1.28bn.
By contrast, the tax relief for individuals on the gift of shares and property was only £70m.
This is despite the fact that, unlike Gift Aid, the relief for individuals can be up to 45% where an individual is an additional rate taxpayer.
Since 6 April 2000, individuals have been able to claim income tax relief at their marginal rate on gifts to charities of certain qualifying shares, securities and other investments.
This was extended from 6 April 2002 to include gifts of land or buildings.
The relief is available where shares or land are given or sold at less than market value to a charity.
The relief reduces an individual’s income tax liability and is in addition to the exemptions from capital gains tax and inheritance tax that apply to the gift of assets to charity.
Unlike Gift Aid, the full benefit of the reduction in income tax is received by the donor.
A similar relief from corporation tax is available to companies giving qualifying shares or land to charity.
There are of course several parameters, protocols and limitations which must be taken into account but, faced with the choice of giving cash, shares or property to a charity, the latter two have become attractive, if little-utilised, options.
However, it is important to note that, unlike Gift Aid, the donation of property and shares do not entitle a charity to claim a repayment of tax and, correspondingly, isn’t marketed by charities in the same way.
There are, therefore, several options open to support lifetime giving, but recent rule changes have also further encouraged legacy giving.
Charities’ income from legacies topped £2.5bn in 2017, rising 39% in five years.
To some extent this has mirrored the introduction by former Chancellor George Osborne of new inheritance tax (IHT) rules for charitable gifts in 2011.
In simplified terms, the new rules, which came into force in 2012, provide a 10% IHT discount for a 10% charitable gift.
That is not to say, though, that the relief is a panacea used to lower tax and simultaneously increase the net residue of an estate for beneficiaries.
Essentially, the IHT saving made will largely pay for a charitable donation, meaning that those taking advantage of the offer will likely be those who are already considering some level of philanthropy.
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