A Simple Guide to Tax-Efficient Giving
Giving to charity can be one of the most rewarding things you do. Not only can you support causes that matter to you, but you can also make sure your gift goes further by giving in a tax-efficient way.
Here’s a straightforward overview of how to give to charity while making the most of current tax relief options.
Gift Aid
Gift Aid is one of the easiest ways to give tax-efficiently. If you’re a UK taxpayer, charities can claim an extra 25p from HMRC for every £1 you give. You just need to tick the Gift Aid box when donating. Some organisations may ask you to fill in a short form.
Gift Aid isn’t limited to charities—community amateur sports clubs (CASCs) can also claim it.
Note: Income tax rates differ slightly between Scotland and the rest of the UK, which can affect Gift Aid claims.
Extra Tax Relief for Higher Earners
If you pay income tax at 40% or 45%, you can claim extra tax relief on your donations.
Example:
You give £100 to charity. They claim Gift Aid and get £125.
You can then claim back £25 from HMRC. So, the donation effectively costs you only £75.
If you complete a self-assessment tax return, you can claim there. If not, you can still contact HMRC to claim back up to £5,000. Claims over £10,000 require more details, including the donation date and recipient.
Giving Through Payroll
Some employers offer a Payroll Giving scheme. This allows you to donate from your gross (pre-tax) salary, meaning you get tax relief automatically.
This makes giving cost less:
* £1 donation costs you 80p (basic rate)
* 60p (higher rate)
* 55p (additional rate)
Ask your employer if they offer this scheme—or if they’d consider setting one up.
Leaving a Gift in Your Will
You can leave money or assets to charity in your will. This can reduce how much inheritance tax (IHT) your estate owes.
If you leave more than 10% of your estate to charity, your IHT rate drops from 40% to 36%.
You can also gift property, investments, or valuable items. These are not counted as part of your estate for IHT purposes.
A more complex option is to set up a charitable trust. This removes the assets from your estate, but you’ll need expert advice to do this properly.
Donating Assets Like Shares or Property
You can donate things like land, property, or shares to charity instead of cash. If you do:
* You won’t pay capital gains tax (CGT)
* You can deduct the value from your taxable income
Some charities may not be able to accept assets directly. In that case, they might ask you to sell them and donate the proceeds. If so, make sure you keep clear records so you can still claim the tax relief.
Final Thoughts
Giving to charity is a meaningful way to support causes you believe in. By planning your giving carefully, you can make a bigger impact and benefit from valuable tax reliefs.
A financial planner can guide you through the best options for your situation, helping you give in a way that’s both generous and smart.
*Information correct as of June 2025. Rules may change with Government policy.