How giving to charity saves you tax….

April 12, 2012

The political fallout on capping the tax relief available from charitable donations doesn’t seem to be going away. Lots of charities have said they are affected and Vince Cable, one of the strongest advocates for cracking down on tax avoidance, has spoken about his concern for universities.

The change won’t come in until next year but my guess would be that it will be reversed by then. I’ve been saying to my charity clients for all time about the importance of building up support from private donors. Now, it looks like the government is cutting funding AND restricting philanthropists from giving money – there will not be any places left to obtain funding for charities.

So if you want to give to charity or want to give more, know that you do get tax relief on it. If you are a limited company and you donate direct, you get corporation tax relief on the donation at 20%. You also have the option of giving personally this only really becomes useful if you are a higher rate income tax payer (if you earn over £42,475).

You also have the option of ensuring your donation goes further by filling out a gift aid declaration (you can’t do this if you contribute through the limited company).

I do often see clients forget that they have given to charity so it is always essential to put it on your tax return to ensure you get any tax relief that may be available. If you are keen to give more over time, a trust is an option. I also have clients who have gone down this route and this is also good for tax planning and can be beneficial for tax saving.

Let’s hope that charitable donations do not go down as a result of this proposed cap and that it gets rectified very shortly.


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