Charity watch - please give generously!
Public attention has recently been focussed on charitable giving in the light of the devastating events in Southern Asia. The government continues to make favourable changes to the rules on tax efficient giving. There are a number of ways of securing tax relief on charitable donations.
Example 1 - Alex makes a one-off donation under Gift Aid. The scheme potentially applies to any charitable donation large or small, whether regular or one-off. The charity is able to claim basic rate tax (at 22%) back from the Inland Revenue. As a higher rate taxpayer Alex will also qualify for 40% tax relief on the gift. Tax relief against 2004/05 income is possible for charitable donations made between 6 April 2005 and 31 January 2006 providing the payment is made before filing the 2004/05 tax return.
Example 2 - Ben agrees to a regular deduction from his salary under the Payroll Giving scheme. There is no upper limit on the amount that can be donated in this way. His tax bill is reduced as his PAYE liability is calculated after deducting the charitable donation.
Example 3 - Camilla decides to leave a substantial bequest to charity in her Will. This saves inheritance tax.
Example 4 - David gives some quoted shares to a charity, on which there is a substantial unrealised capital gain. However no CGT arises on a gift to a charity. The charity can then sell the shares free of CGT providing it applies the proceeds for charitable purposes. Furthermore income tax relief is available on the value of the shares gifted. The same rules apply to gifts of land and buildings.
