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Tax Effective Giving and Your Organisation

By: Tracy Whitelaw - Updated: 4 Sep 2012 | comments*Discuss
Tax Effective Giving Gift Aid Tax

There are a number of ways to maximise your charities income through some of the tax relief that is currently available in the UK. Every fundraiser should be aware of how their own organisation can make the most of tax-effective giving and should learn the different ways that that can be involved in these schemes. Even the public should be aware of different ways that they can contribute to a charity effectively when it comes to tax.

Gift Aid and Tax Effective Giving

One of the easiest ways to give to a charity is to use Gift Aid. Gift Aid is a scheme supported by the Inland Revenue where every pound that is donated to a charity is supplemented by an additional 28 pence from the Inland Revenue. The great thing about this is that it applies to any monetary amount, so if you do have a substantial amount to give, your charity can benefit immensely from Gift Aid.

You can also use Gift Aid whether you pay cash, postal order, cheque, credit card, debit card, standing order or direct debit. If you often give money to charity, you are able to claim a Gift Aid declaration to any past donations you've made since April 2000 or any possible future monetary support you make to your chosen charity.

If you're one of the unlucky people who have to pay the higher tax rate of 40% instead of 22%, you're able to claim up to £23 in every £100 that you donate to charity. All you need to do here is remember to mention it in your self-assessment tax return form when it comes to doing your taxes.

You can fill in your Gift Aid claim wherever you normally donate to charity or you can simply download a Gift Aid form from The Giving Campaign website. If everyone made the most of tax-effective giving in this way, charities would be able to claim a huge amount of extra money from the Inland Revenue each year, boosting their monetary funds and helping them carry out more of the good work they already do.

Tax Effective Giving and Charitable Trusts

If you have set up a charitable trust where you want to ensure that some of your assets or income is given to a charitable cause, you are eligible to receive money through tax-efficient charitable giving means. There are a variety of different ways to set up a trust, but generally you must state a donor, a trustee, the charitable purpose and a trust deed.

The donor can be yourself, or whomever you consider to be part of the trust. The trustees should be the people involved in the trust and someone who has no direct involvement in it, such as a lawyer or family friend. When you outline the charitable purposes of your trust, you should clearly identify the type of fundraising or charity that your trust intends to support and always have in place a trust deed that forms the trust's constitution.

Always use a lawyer to help you set up your trust as it can be fraught with legal red tape that only experts truly understand. Once you have your trust in place however, you are independent of Government control and only have to answer to the Charity commission. Your trust is an effective way of receiving tax on charity donations and as it's within your control, you can decide exactly how much you want to spend and where.

Tax Effective Giving and Your Payroll

In the UK there is a scheme known as Payroll Giving. This allows you to donate to charity directly from your gross salary before tax has been deducted. Many employers offer this service and if they don't, many are happy to consider setting it up if their employees are keen to do so. How it works is that if you want to donate say £100 to a charity, you will give only £78 if you pay 22% tax or just £60 if you pay 40% tax.

A number of employers offer a service where they will match their employee’s contribution, so your chosen charity or fundraising cause can benefit greatly from this scheme. As the payments are taken directly out of your salary, you tend not to notice them as much and it's very easy to set up. If you're paid through the PAYE system, your company are usually eligible to offer Payroll Giving to you, so speak to your employer today if you're not sure.

There are a few other ways that you can get involved in tax effective giving - you can give shares or you can leave a gift in your will. Both make the most of tax effective giving which ultimately benefits your chosen charity and also makes you feel that you're doing something to help.

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