Everyone loves being charitable but is there a tax break in it for you? The feeling your money is going to literally change people, or animal habitats or the environment can be an empowering experience. However, lots of charities want UK taxpayers to fill out Gift Aid declarations – so that the donation itself is ‘treated’ as a Gift Aid Donation. This can have significant repercussions for those who are self-employed. Let’s find out more.
What Tax Breaks Are Available?
In the UK, those who are feeling generous with their donations have access to a range of tax reliefs that kick in when an individual donates to a registered UK charity.
Gift Aid allows UK-based charities to legally claim back the ‘basic rate of tax’ on an individual donation from a UK-domiciled donor. So, for example, a charity receives a £1 donation can claim back 20p as the basic rate of tax is 20%.
However, for individual self-assessment freelancers, you can legitimately claim the difference between the basic rate on the donation and the actual tax rate they pay (if they earn beyond the basic rate threshold). This is achieved through the Self-Assessment tax system.
Another way is Payroll Giving – directors and staff alike can make charitable donations directly from their salaries. However, this requires your business to set up a Payroll Giving function. The donations are deducted from the gross pay and the tax break is given at the income source.
Some people donate properties, land and even shares to charity. There is relief available for such donations as you can get relief for both the Capital Gains Tax and the Income Tax elements of the donation. This requires painstaking documentation to prove that the charity has accepted this donation in good faith.
Another relief, that links with estate planning, is the ability to reduce Inheritance Tax from 40% to 36% on estates of individuals who donate a minimum of 10% of their entire estate to charity.
At Prestige Business Management we have partnered with Bikers Against Child Abuse as our in-house charity of choice. We donate as do our clients through our referral scheme. If you’d like to know more about BACA, please visit our partner page.
Call Prestige Business Management Today!
Call Prestige Business Management on 0203 774 2927 to talk to the team today about charitable giving and tax breaks. We can help with estate planning, personal tax and business tax and accountancy issues relating to charitable giving and tax relief.
This Prestige Business Management article is for guidance only – please do not utilise the guidance above as a form of financial advice.