How to Claim UK Tax Benefits on Charitable Donations

Did you know that you can reduce your tax bill just by making a donation to charity? In some cases this figure can be either reclaimed by the charity or used to offset your own tax liability.


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    Any charity registered with the Charity Commission (look for "registered charity" on its literature) or organisations like Schools, Hospitals and Churches that automatically have charitable status can take advantage of schemes allowing them to reclaim your tax.
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    The simplest way to give is via "gift aid". This allows charities to claim back your tax from the Inland Revenue on both one-off and regular donations. There's no minimum contribution so even on the smallest donations the tax is reclaimable.
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    All the charity needs is your name, address and a declaration that you're a UK taxpayer. It can even be done over the phone or face to face as written proof is not required.
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    Another easy solution is to give via "payroll giving" where you donate a regular amount which is taken direct from your salary, through your employer's payroll. As the donation is given before any tax is taken off, the charity automatically receives all the tax on both basic rate taxpayers and higher rate taxpayers.


  • Charities reclaim the tax at the basic rate, which means they get around 28% more than you donate (e.g. you give £50, the charity gets £64.10). People paying tax at the higher 40% rate are able to reclaim the extra 18% tax they've paid for themselves on top of this, so on £50 that's another £11.50. However, the tax self-assessment form does also include a note of charity gifts so higher rate taxpayers can choose to donate this extra tax to charity too.
  • If you work for a 'Small to Medium Enterprise (SME) - a company with less than 500 employees, there's a way to get more cash. If it sets up payroll giving between April 2004 and December 2006, then the Government will match the first £10 of your total donations made before March 2007, when you begin donating.
  • To make tax efficient donating even easier, The Charities Aid foundation runs a special Charity Account. You pay money in directly through either Gift Aid or Payroll giving and it automatically collects the tax and adds it to your account. After this you can use its special card or cheque book to donate from this account to a charity of your choice. The big advantage here is you can donate on impulse - you can even put these special cheques in collection tins to enable the charity to gain the maximum amount.
  • Donating shares to charity is a less well known way of giving to charity but there can be substantial tax benefits here. When you sign over shares to charity there's no capital gains tax and you can offset their value on the day of transfer against your income tax liability.


  • With "payroll giving" The only problem is that employers must have a scheme in place as you can't do it on your own. If your firm doesn't run a scheme, suggest they try it. It is a simple process run through the automated payroll. Self-employed sole traders cannot use this scheme.

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Categories: Taxes and Fees