Give and save

There are very generous tax reliefs for giving to charity, whether you give cash, quoted shares or land.

Gifts made under Gift Aid before you complete your tax return can reduce the tax payable for the year the tax return covers. For example a gift made on 31 December 2012 can reduce the 2011/12 tax which is due on 31 January 2013, if the 2011/12 tax return is submitted in January 2013.

If you pay tax at 50% in 2012/13, you may want to carry back tax relief from gifts made in 2013/14, as the top tax rate will be cut from 50% to 45% for 2013/14. This carry-back of Gift Aid can also reduce your income used to calculate the clawback of child benefit from 7 January 2013, or the excess income over £100,000 that reduces your personal allowances.

Say you pay tax at 40% and give £800 cash to charity. The charity reclaims the basic rate tax you’ve paid, £200 (giving it £1,000 in total), and you reduce your top-rate tax bill by £200. Your gift costs you £600, net of tax relief. For a 50% taxpayer the net cost would be only £500.

Giving quoted shares or land produces income tax and capital gains tax (CGT) reliefs. Say you give shares worth £10,000. This generates an income tax reduction of £4,000 (for a 40% taxpayer). If the shares would otherwise produce a gain of £6,000 on disposal, you can save CGT at 28%, that’s £1,680. So the charity receives £10,000 for a cost to you of only about £4,320.

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