Inefficient giving costs charities nearly 1 billion
- In 2007/08 UK adults gave 10.6bn to worthy causes, but gifted nearly 1bn to the taxman
- Use Gift Aid and make your donations tax-efficient
UK charities missed out on nearly 1 billion in donations last year – 101 million less than the previous year – as a result of tax-inefficient giving by generous donors. Research* from Unbiased.co.uk, the online Find an IFA Search, shows that donors could be doing more to support charitable funds without wastefully allowing the taxman to claim nearly 1 billion that could be going towards good causes.
In 2007/08 UK adults gave a total of 10.6 billion** to charity; however according to Unbiased.co.uk’s annual ‘TaxAction’ report (part of the campaign looking at the total amount we waste in tax each year) this amount could be bolstered by nearly 10% (i.e. nearly 1 billion), if donors had made the most of the tax allowances available to them.
Brits can tax efficiently donate to charity via Gift Aid. Gift Aid is a form of opt-in tax relief on money donated to UK charities, whereby the charities can reclaim basic rate tax on a donation. Gift Aid is most commonly utilised by larger donors (i.e. those who give more than 100 per month), however figures reveal that the proportion of donations of 100 or more that used Gift Aid has dropped from last year’s peak of 70% to 64%**.
David Elms, Chief Executive of Unbiased.co.uk commented, “With almost 28 million Brits donating to charity in a typical month**, UK taxpayers remain very generous with their donations. Despite fears of recession looming, many individual donors have increased their charitable support in 2007/08, but it is unfortunate that not all donations are being made in a tax-efficient manner. Nearly 1 billion is going to the tax man when this could be easily avoided by making use of Gift Aid.”
Payroll giving (Give as You Earn) is another tax efficient form of donating to charity. This scheme allows employees to contribute a regular sum, taken out of their salary by their employers and given to the employees chosen charity.
Elms continued, “Using the most tax-efficient methods of donation allows those who are very active in philanthropy, and also those who give one-off gifts in response to specific events, to ensure the worthy cause gets as much money as possible. A visit to an independent financial adviser can help you take control of your finances, and plan both your personal finances and donations tax-efficiently. No matter how small or large your donations, charities will always be grateful for you using the most tax effective way of making the donation.”
-ends-
Tax doesn’t have to be taxing – Here are 10 basic ways** to claw back some of the waste:
- IF YOU HAVE ASSETS OVER 312,000: Plan your inheritance - an extra 1.9 billion could go to chosen heirs by planning properly to avoid IHT liabilities. IHT is often lost through not writing life assurance policies in trust, not thinking about inheritance tax allowances and, worst of all, by not making a will at all.
- IF YOU SAVE: Use up your annual ISA allowance - 263 million in tax could be avoided by sheltering investments in ISAs, or moving savings from an ordinary deposit or savings account to an ISA. Also consider a Friendly Society savings account or products from National Savings & Investments as tax-efficient savings options.
- IF YOU ARE ELIGIBLE: Claim your tax credits - 3.7 billion of ‘free money’ is up for grabs from HMRC and the DWP, in the form of Pension Credits, Child Tax Credits and Working Family Tax credits.
- IF YOU FILL IN A TAX RETURN: Sort out your self-assessment - 479 million waste could be wiped out by all forms arriving present and correct by the 31st January deadline. Self-assessment forms received after the deadline incur penalties of 100; further penalties and errors make up the balance of tax wasted in this way.
- ALL TAXPAYERS: Maximise your personal tax allowances - 474 million goes begging each year, 330 million through non-taxpayers failing to claim tax back on banks and building society savings accounts, and a further 144 million by taxpayers not transferring savings accounts to non-taxpaying spouses, if appropriate, so that the tax liability on the savings is lower, or none.
- IF YOU SAVE: Top up your pension pot - 726 million could be spared by optimising contributions to personal or company pension schemes, or making Additional Voluntary Contributions.
- IF YOUR EMPLOYER OFFERS AN EMPLOYEE SHARE PLAN: Take advantage of it - 184 million is up for grabs for the estimated 600,000 staff currently in Profit Related Pay schemes.
- IF YOU HAVE CAPITAL GAINS: Use your allowance efficiently, perhaps by transferring assets between spouses to make the most of both of your CGT allowances - 264 million could be saved in this way.
- IF YOU GIVE TO CHARITY: 936 million more could go to good causes by using tax-efficient means of charitable giving, i.e. using a deed of covenant, Gift Aid or payroll giving.
- IF YOUR CHILD OR GRANDCHILD IS ELIGIBLE FOR A CHILD TRUST FUND: Avoid waste by using up the tax free saving potential - 242 million in tax could be saved in their first yearof existence.
* TaxAction 2008 report produced for IFA Promotion by RAKM, based on a specially commissioned analysis of Inland Revenue and a range of other official data sources.
** Charities Aid Foundation and National Council for Voluntary Organisations: UK Giving 2008: An overview of Charitable giving in the UK in 2007/2007, available at http://www.cafonline.org/pdf/UK%20Giving%202008.pdf
For further information please contact:
David Elms | Anna Schirmer/Jennifer Comerford/ Anna Moulds |
Chief Executive | Lansons Communications |
Unbiased.co.uk | 020 7294 3682 |
020 7833 3131 |
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