Gifting to charity in your Will is a meaningful way to support causes that matter while also benefitting from financial and legal advantages. Individuals and businesses can take advantage of tax relief provisions, inheritance planning opportunities and the satisfaction that comes with charitable giving.
Whether donating cash, property or other assets, charitable giving can – with the correct advice – be a strategic decision that benefits both donors and the wider community.
1. Gift Aid – Tax Relief on Charitable Donations
One of the key advantages of charitable giving in the UK is the tax relief available through schemes such as Gift Aid. When an individual donates to a registered charity, Gift Aid allows the charity to claim an additional 25% on top of the donation, at no extra cost to the donor. For higher and additional rate taxpayers, there is also the possibility of claiming back the difference between the basic and higher rate of tax on their donations through a self-assessment tax return. For businesses, donations to charity can often be deducted from taxable profits, reducing the overall tax liability.
This makes charitable giving a smart financial choice for companies looking to contribute to social causes while managing their tax obligations effectively.
2. Reducing Inheritance Tax Liability
Gifting to charity can also play an important role in inheritance tax (IHT) planning. In the UK, estates worth over the current IHT threshold are subject to a 40% tax rate on amounts exceeding that limit. However, gifts to charity are exempt from IHT, meaning that any portion of an estate left to a charitable organisation will not be taxed.
Additionally, if at least 10% of an estate’s net value is donated to charity, the overall IHT rate applied to the remainder of the estate may be reduced from 40% to 36%. This provides an incentive for individuals to incorporate charitable giving into their Wills, benefiting their chosen causes while also reducing the tax burden on their heirs.
3. Donating Assets and Property
Beyond cash donations, individuals and businesses can also donate assets such as land, property, shares or valuable possessions. Donations of certain assets can qualify for tax relief, allowing the donor to claim exemptions from Capital Gains Tax (CGT) and receive additional tax deductions. For instance, donating shares to a registered charity means that the donor will not have to pay CGT on any increase in value, and they may also be able to claim income tax relief on the value of the donation.
This can be an effective way of supporting charities while also optimising financial planning.
4. Corporate Social Responsibility Benefits
For businesses, gifting to charity enhances Corporate Social Responsibility (CSR) initiatives. Supporting charities not only helps to build goodwill within the community but also improves brand reputation and customer loyalty. Consumers and employees increasingly favour businesses that demonstrate a commitment to social causes, making charitable giving an effective way to strengthen stakeholder relationships. Moreover, employee giving schemes, such as payroll giving, allow staff to donate to charities directly from their wages before tax is deducted.
This provides a cost-effective way for employees to support charities while reducing their taxable income.
5. Social Impact
While the financial benefits of charitable giving are significant, the personal rewards are just as valuable. Supporting charitable causes provides a sense of fulfilment and the knowledge that one’s contributions are making a tangible difference.
Many charities rely heavily on donations to fund their vital work, from supporting vulnerable individuals to advancing medical research or protecting the environment. By gifting to charity, donors contribute to positive societal change and help organisations continue their valuable missions.
Summary
Gifting to charity is not only an act of generosity but also a smart financial decision. From tax relief benefits to inheritance planning advantages, charitable giving can be a strategic part of financial and legal arrangements. Whether donating as an individual or a business, the impact of charitable contributions extends beyond financial savings.
For those considering charitable giving, seek our advice. We can ensure that donations are structured in the most effective way possible, maximising benefits for everyone concerned. With careful estate planning, donors can make a lasting difference while enjoying the advantages that come with supporting worthy causes.
Contact us below for more help.