Charitable Giving and GiftAid – 2018/19 Tax Year End
In this blog mini-series, our Tax Partner, Terry Smith CTA ATT, provides his thoughts on a number of matters that should be considered prior to 5th April 2019. As well as confirming the details of allowances and forthcoming legislative changes, Terry also offers some advice to help clients make informed and timely decisions.
In this post, Terry provides an update and actions relating to Charitable Giving and GiftAid.
Other topics in this blog series:
Charitable Gift Aid Payments
If a higher rate or additional rate taxpayer makes a Gift Aid donation, further tax relief is available to the donor over and above the tax relief claimed by the charity. A Gift Aid donation of £80 is worth £100 to the charity. A higher rate taxpayer will qualify for further tax relief of £20, so the net cost of the donation is only £60. For an additional rate taxpayer, the further tax relief is worth £25, so the net cost of the donation is only £55. You should keep a record of Gift Aid donations made in the year.
Finally, please remember that if you are not a UK taxpayer, you cannot make Gift Aid donations. As an alternative to or in combination with gift aid donations, if you are in a position to leave at least 10% of your estate on death to charity, the rate of inheritance tax charged on the balance of your estate is reduced from 40% to 36%. Whilst this appears quite modest, the savings can be significant: if one takes £1m on which inheritance tax is due at 40%, the inheritance net of tax is £600,000. If £100,000 was given to charity, only £900K is left, but after tax at 36%, £576,000 is left. Thus, £100,000 is passed to charity at a cost of £24,000 to the family.
All the articles in this blog series have been written to provide general advice that relates to all our clients. If you have questions regarding your own personal or commercial circumstances, please contact a member of the team today.
The tax year ends on 5th April, but please be aware that some changes may come into effect on 1st April. Plan ahead.