SME Adviser Series: Tax relief on charitable donations

Almost £1.5 billion of tax relief was claimed by individuals making gifts to charity last year, according to figures from HM Revenue & Customs, an increase of more than 50 per cent since 2012.

Individuals with annual incomes of at least £250,000 accounted for approximately half the total value of donations declared on self-assessment forms, with the largest proportion of donors being located in or around London and the South East.

And in other research, published by the Institute for Fiscal Studies, more than two out of five higher-rate taxpayers were found to not reclaim tax on donations, mostly because they were not aware they could.

Do you or your team members donate to charity?

Donations to charity from individuals are tax free. You can get tax relief if you donate through Gift Aid and straight from your wages or pension, through Payroll Giving.

If you are taxed through the PAYE system then Payroll Giving could be beneficial. This is a scheme that enables employees to give to charity straight from their gross salary before tax is deducted, and to receive immediate tax relief of up to £5 for every £10 donated. It is therefore much better than paying from your taxed income.

Alternatively, Gift Aid may be an attractive option. Here, donations are treated as basic rate tax paid, so the charity can claim that tax. If you pay income tax at 40 or 45 per cent, you can claim back the difference between the tax you’ve paid on the donation and what the charity got back when you fill in your Self Assessment tax return. Your tax-free allowance may also increase if you make donations through Gift Aid and claim Married Couple’s Allowance.

If you would like to discuss how charitable giving can benefit you and your team, please contact your usual Beavis Morgan Partner or email