There aren’t many legitimate ways left to avoid paying tax – that’s just one reason why you should definitely take full advantage of reliefs available on charitable donations. Gift aid lets you make either a one-off donation, or a series of them, to a charity of your choice, which they can top up with basic-rate tax relief. So, with basic-rate tax at 20%, a £100 gift becomes £125. In addition, a higher-rate taxpayer can claim back higher-rate relief of 20% via a self-assessment tax return. A single gift aid declaration form (which is usually available on a charity’s website, or can be sent by post) needs to be completed, but it then covers all subsequent donations to the same organisation.
Employees might prefer to make donations via their work payroll, known as Give as you Earn. This time, full tax relief is available to both basic and higher-rate taxpayers. So for a basic-rate taxpayer a £100 monthly donation costs just £80, while for a higher-rate taxpayer it costs just £60 of their after tax income.
Charity accounts
If you regularly donate money to more than one charity, then you can reduce the administrative headache of multiple gift aid forms by registering with the Charities Aid Foundation (Cafonline.org). You can then make one-off or regular donations to charities on a list of over 4,000 with CAF organising the relevant Gift Aid. In return they charge a commission of 4% of the amount donated.
Stocks and shares
It’s also possible to give shares to charity and claim income tax relief on their value and an exemption from capital-gains tax. This can be an costly hassle for small holdings. But Sharegift.org.uk will sell shares on your behalf, no matter how few there are, and donate the profits to charity. This is a particularly nifty scheme, as “millions of pounds are tied up in tiny holdings of shares that would cost more to sell than they are worth”, according to a ShareGift spokesman in The Daily Telegraph.