Tax Relief For Charitable Donations

The plight of displaced persons in Ukraine has focussed our attention on how we might make charitable donations to ease their suffering. But what tax relief can you claim should you wish to make a donation ...

Providing the organisation you are donating to is a registered charity there are certain things you must remember:

- If you're donating from your limited company, Gift Aid doesn't apply and your donation is treated as a normal business expense that reduces your profits, ultimately reducing your corporation tax bill.

- However, if you donate as an individual, the amount you give is treated as received by the charity after 20% tax has been deducted. Providing you have paid enough tax on your earnings yourself, the charity can recover that 20% directly from HMRC.

This means that a net donation of £80 turns into £100 received by the charity, which equates to £80 from you and £20 from HMRC. Should you pay at a higher rate of tax, you can claim the excess over the 20% basic rate by making a claim on your self-assessment tax return or by contacting HMRC yourself.

The charity will ask you to make a Gift Aid declaration when you make your donation!

There are certain appeals that see matching fundraising from the UK Government. This is the case with the Disaster Emergency Committee appeal, securing funding for humanitarian relief in Ukraine. The UK Government is matching pound for pound up to a ceiling of £20 million. You can discover more about this appeal by clicking here.

And finally, charitable donations can be used to reduce your net income below certain thresholds. For example, you could donate to reduce your income below £50,000 to avoid repayment of Child Benefits, or below £100,000 to avoid loss of your Income Tax personal allowance.

And, as I always recommend, you should seek professional advice before making decisions regarding your finances.

If you feel inspired to find out more about anything I've said here, do call me on 01908 774320 or leave a comment below and I'll be in touch as soon as I can.