Tax relief on charity donations

by | Mar 10, 2022

We thought it would be helpful to look at the tax relief available on charity donations and how donating to approved schemes such as that of the Disaster Emergency Committee scheme boost donations further.  The current events in Eastern Europe have focussed  all our attentions on the plight of displaced persons in Ukraine and donating funds might help to ease their suffering.  This blog post sets out the tax relief you can claim should you wish to donate.

The following will apply providing the agency, you are donating to is a charity.

Donations from your limited company

As your company is not subject to income tax the gift aid regulations do not apply. Accordingly, any donation from your company is treated as a business expense that reduces your profits and therefore reduces your corporation tax bill.

Donations from individuals

If you make a personal donation to a charity, that offers gift aid options, the amount you give is treated as received by the charity after 20% tax has been deducted. As long as you have paid enough tax on your earnings to cover the deemed tax deducted, the charity can recover the 20% tax from HMRC.

This turns a net donation from you of say £80 into £100 received by the charity (£80 from you and £20 from HMRC).

If you pay income tax at 40% or 45% you can claim the excess over the 20% basic rate (20% or 25%) by making a claim on your self-assessment tax return or by contacting HMRC and making a claim.

To secure the claim to HMRC, the charity will ask you to make a gift aid declaration when you make your donation.

Note – regional variations may apply when there are differences in local income tax rates, Scotland for example.

UK Government supported appeal – DEC

Certain appeals may draw matching funding from the UK Government; this is the case with an appeal launched by the Disaster Emergency Committee to secure funding for humanitarian relief in Ukraine.

The government will match donations £ for £ up to a £20m ceiling.

To view more information on this appeal, go to https://www.dec.org.uk/appeal/ukraine-humanitarian-appeal.

Important – tax planning note 2021-22

Charitable donations can also be used to reduce an individual’s net income below certain break points. For example, below £50,000 to avoid repayment of Child Benefits and below £100,000 to avoid loss of the income tax personal allowance.

If you would like help with tax relief on charity donations, gift aid claims or tax planning in general please contact us on 020 7330 0000.

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