5 Financial Advantages of Giving to Charities

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Charities are an integral part of our society. Many of us can attest to this. This is demonstrated by the impact that they have on so many lives. We can also see their importance in our Government’s priorities.  For example, the Government earmarked £750 million to support the work of Frontline Charities during the COVID 19 pandemic. Others, including businesses and individuals, are donating to charities to support various good causes.

Are there financial advantages to Businesses or Individuals when they donate to Charities? Let us take a closer look at five financial advantages of donating to Charities.

1) Gift Aid.

2) Tax refund (Income tax relief) for additional tax and higher rate taxpayers.

3) Capital gains tax (CGT) relief.

4) Reduced rate of IHT.

5) Relief on Corporation Tax.

Gift Aid &Income tax relief

You will receive income tax relief when you donate to charity.

i) For all Taxpayers (Basic, Higher or Additional rate):

If the charity you support claims gift aid, the amount you have donated to Charity is increased by 25% to support the cause you care about.

ii) If you are an additional rate taxpayer or a higher rate taxpayer, then you receive a tax refund. The refund is equal to the tax paid on your donation, less the basic rate amount of gift aid on your donations.

iii) If you donate to charity by payroll giving, the amount you directly pay from your salary will not be taxed at all.

Reduced rate of IHT for your beneficiaries

Your Will determines what will happen to your money, property, and possessions after you die.

Where 10% or more of your net estate is left to charity, the rate of tax charged on the estate is reduced to 36%. The standard rate is 40%, chargeable on the part of the estate above the threshold.

Capital Gains Tax Relief

When you donate land and properties to Charity, you will not need to pay a CGT on such donations.

Corporation Tax Relief

The corporation tax that a company pays is based upon the profit the company makes in the company’s financial year.

When the Company donates to Charities / a Charity, it does not need to pay a corporation tax on the amount donated to Charities. You can claim tax relief by deducting the value of your donations from your total business profits before paying tax.

Donations to Charities may not necessarily be monetary. The company may donate goods or pieces of equipment that it manufactures or sells. It may also donate land, properties, or shares (in other companies), employees (on secondment), or sponsorship payments.

There is a satisfaction that comes from giving to the Charities that take care of the causes you care for, along with some financial advantages.

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