Inefficient Giving Costs Charities Over £1 Billion

For Immediate Release – 7th January 2008

·        UK adults gave £8.9bn last year to worthy causes, but gifted another £1bn to the taxman

·        Use Gift Aid and make your donations tax-efficient

UK charities missed out on more than £1 billion in donations last year – £229 million more than the previous year – as a result of tax-inefficient giving by generous donors. Research* from Unbiased.co.uk, the website promoting the benefits of independent financial advice, shows that charitable givers could be doing more to fill charities’ coffers without wastefully allowing the taxman to claim over £1 billion that could be going to good causes.

Last year UK adults gave a total of £8.9 billion** to charitable causes; 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 an extra 12% (i.e. approximately £1 billion), if donors had made the most of the tax allowances available to them.  

Description of waste

Amount of tax waste (£m)

Failure to use Gift Aid on small donations

250

Failure to use Gift Aid on larger donations

450

PAYE errors by higher-rate taxpayers

337

Total tax waste

1,037 (or approx £1billion)

Over half of UK adults gave money to charity in a planned and tax-efficient way (i.e. through payroll giving, or Gift Aid) regularly last year**. 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. Small, one-off donations very rarely make use of Gift Aid and this oversight may not be significant at the level of just one person, but across the UK population it generates tax waste of £250 million.

However, Gift Aid is also under-utilised by around two thirds of larger donors (i.e. Those who give more than £100 per month). This failure to take advantage of the tax breaks engendered by Gift Aid results in unnecessary tax payments of £450 million.

David Elms, Chief Executive of Unbiased.co.uk commented, “UK taxpayers have dug deep and been very generous with their donations, making it a record year for charitable giving, but it is unfortunate that not all donations are being made in a tax-efficient manner. Nearly three quarters of a million (731,000) people** who give more than £100 per month do not make use of Gift Aid to maximize their gifts to their chosen good cause(s).”

Payroll giving (Give as You Earn) allows employees to dedicate a regular sum, taken out of their pay by their employers and given to their own chosen charity/ies. This is the most tax efficient way of giving to charity, but more than four in five employees who donated more than £5 a year don’t make use of the facility. As a result Unbiased.co.uk estimates that UK charities missed out on an additional £337 million in tax refunds last year, as without using Payroll Giving many higher rate taxpayers are giving inefficiently and overpaying on tax.

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-

* IFA Promotion’s TaxAction 2007 report: produced for IFA Promotion by RAKM, February 2007

** National Council for Voluntary Organisations: Charitable giving 2005/2006, available at http://www.ncvo-vol.org.uk/uploadedFiles/NCVO/Research/UK%20giving%202005-06.pdf

For further information please contact:

David Elms

Anna Schirmer/Jonathon Grove

Chief Executive

Lansons Communications

Unbiased.co.uk

020 7294 3682

020 7833 3131

 

For expert comment or case studies from over 200 media-friendly IFAs, journalists should call Unbiased.co.uk’s Media Services hotline on

020 7294 3682 or search online at www.unbiased.co.uk/media

1.      Independent Financial Adviser Promotion

Unbiased.co.uk is the consumer brand of IFA Promotion, the organisation established in 1989 to promote the value and accessibility of independent financial advice to the public. It represents around 9,000 firms of independent financial advisers across the UK, incorporating over 17,000 registered individuals. These individuals hold over 22,000 incremental qualifications which are each individually verified by the awarding body. IFA Promotion welcomes the prominent display of incremental qualifications and further developments into the credentials of independent financial advice.  

IFA Promotion is sponsored by 28 leading financial institutions, and in the past 12 months, over 575,000 consumers and businesses used unbiased.co.uk to find local independent financial advice.

IFA Promotion believes Independent financial advice should be:

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