Tax Treatment of Giving and Government Incentives (UK)
Gift Aid
Gift Aid is a UK tax incentive that enables tax effective giving by individuals to charities in the United Kingdom. [1]
According to Gov.uk [2]
Donating through Gift Aid means charities and community amateur sports clubs can claim an extra 25p for every £1 you give. It won’t cost any extra to the taxpayer.
£1.06 billion [3] was claimed in Gift Aid in 2013/14.1)
The National Audit Office reported that £2.3 billion [4] in donations were made in 2012 on which Gift Aid was not claimed, thus setting a maximum figure of £575 million in unclaimed Gift Aid that year.
“According to the Charities Aid Foundation, over £750 million of potential Gift Aid goes unclaimed each year.” [5]/
Higher Rate Relief
The table [6] below displays the tax rates at different levels of income in the UK (tax year 06/04/2016 to 05/04/2017).
| Band | Taxable Income | Tax Rate |
|---|---|---|
| Personal Allowance | Up to £11,000 | 0% |
| Basic Rate | £11,001 to £43,000 | 20% |
| Higher Rate | £43,001 to £150,000 | 40% |
| Additional Rate | Over £150,000 | 45% |
“If you pay at the higher or additional rate you can claim the difference between the rate you pay and basic rate on your donation.” [2]
Payroll Giving
From Gov.uk:
If your employer, company or personal pension provider runs a Payroll Giving scheme, you can donate straight from your wages or pension.
This happens before tax is deducted from your income. Ask your employer or pension provider if they run a Payroll Giving Scheme. You can’t donate to a community amateur sports club (CASC) through Payroll Giving. The tax relief you get depends on the rate of tax you pay (see above for different tax rates in the UK). To donate £1, you pay:
* 80p if you’re a lower rate taxpayer
* 60p if you’re a higher rate taxpayer
* 55p if you’re an additional rate taxpayer” [7]
Example of a Payroll Giving Service
Enables your employees to make simple, tax-effective donations to any UK charity or good cause.
If you pay your employees or pensioners through Pay As You Earn (as most UK companies do), you can set up a Payroll Giving scheme.
Run through HMRC and administered by Charities Trust, we process and payout to any charity or recognised good cause registered within the UK.
Donations are deducted from gross pay – before tax is deducted. This gives immediate tax relief on donations and means it costs less for your employees to donate. The table below gives some examples:
| Your Pledge | As a 20% taxpayer you pay | As a 40% taxpayer you pay | As a 45% taxpayer you pay | Your charity receives |
|---|---|---|---|---|
| £5.00 | £4.00 | £3.00 | £2.75 | £5.00 |
| £10.00 | £8.00 | £6.00 | £5.50 | £10.00 |
| £50.00 | £40.00 | £30.00 | £27.50 | £50.00 |
*These figures are dependent on whether you the employer chooses to pay the 25p administration charge.
Donating Land, Property or Shares
“You don’t have to pay tax on land, property or shares you donate to charity. This includes selling them for less than their market value.[2]
You can get relief on both income and capital gains tax.”
Legacy Giving
The ten largest recipients of Legacy Income [10]
| Organisation | Legacy Income |
|---|---|
| Cancer Research UK | 157.4 |
| The Royal Lifeboat Institution | 93.8 |
| Royal Society for the Prevention of Cruelty to Animals | 74.9 |
| British Heart Foundation | 52.4 |
| The National Trust for Places of Historic Interest or Natural Beauty | 50.3 |
| Macmillan Cancer Support | 44.0 |
| The People’s Dispensary for Sick Animals | 41.2 |
| The Salvation Army | 40.7 |
| The Royal National Institute of Blind People | 38.1 |
| The Guide Dogs for the Blind Association | 31.7 |
Comparison to Other Countries
Tax Incentives in the United States
Recent and Proposed Changes
Small Charitable Donations Bill [12]
The intention of the Bill is to simplify the Gift Aid Small Donations Scheme (GASDS), so that it benefits the greatest number of charities and increases access for smaller and newer charities. The Bill in its current form will struggle to fulfil these objectives.
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