Many people make regular donations to charities, but are unaware that they can claim back the tax on the money they give.
As long as the organisation is a registered charity or a community amateur sports club (CASC), then you get tax relief on the donation you make.
When making donations as a Limited Company
You can reduce the amount of Corporation Tax you pay if you donate the following to charity:
You can claim tax relief by deducting the value of your donations from your total business profits before you pay tax.
If you have donated money or given or sold land, property or shares, you can claim tax relief in your Company Tax Return that covers the accounting period which you have made the donation or sale.
If you have seconded employees or sponsored a charity, you can deduct the costs as normal business expenses in your company’s annual accounts.
And finally, if you donated equipment, you can claim capital allowances on the cost of the equipment you donate in your company’s annual accounts.
Donations as a Sole Trader or Partnership
Making donations to a registered charity or community amateur sports club (CASCs) are tax free.
The tax goes to you or directly to the charity depending on how you donate.
There are different methods in how you can donate such as:
- Gift Aid
- Directly from your wages or pension through a Payroll Giving scheme
- Through land, property and shares
- Allocating donations through your will
Charities and community amateur sports clubs (CASCs) can claim an extra 25p through Gift Aid for every £1 donated on most donations (some payments do not qualify).
It will not cost the person donating any extra.
You need to fill in a Gift Aid declaration form for the Charity to be able to claim. The charity or CASC should provide this.
Donating directly through your wages or pension
You can donate to a charity straight from your wages or pension.
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.
If you are a Higher-rate taxpayer and make a charitable donation, then you can claim back the difference between the tax you paid on the donation, and what the charity got back, by providing this information when you complete your Self-Assessment Tax Return.
Donating through land, property and shares
You do not have to pay tax on land, property or shares you donate to charity.
You can get tax relief on both:
* You cannot get Income Tax relief on donations to community amateur sports clubs (CASCs).
Allocating donations through your will
You can allocate money, property or possessions to charity in your will.
Your donation will either be taken off the value of your estate before the Inheritance Tax is calculated or if you leave more than 10% of your estate to charity, then this will reduce the rate of Inheritance Tax that will need to be paid.
It is vital that you keep accurate records of donations if you want to claim tax back on them.
How Blue Spire can help
There are many rules around claiming tax relief on charitable donations which can be difficult to understand.
Blue Spire can help to discuss your options and provide advice on where you may be able to make substantial savings and reduce your taxes.