Tax relief when you donate to a charity

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1. Overview

Donations by individuals to charity or to community amateur sports clubs (CASCs) are tax free. This is called tax relief.

The tax goes to you or the charity. How this works depends on whether you donate:

This also applies to sole traders and partnerships. There are different rules forlimited companies.

If you want to donate to a sports club, check if it’s registered as a community amateur sports club (CASC). You can’t donate to a CASC through Payroll Giving.

Keeping records

You’ll need to keep a record of your donations if you want to take them off your total taxable income.

 

 

2. Gift Aid

Donating through Gift Aid means charities and community amateur sports clubs (CASCs) can claim an extra 25p for every £1 you give. It won’t cost you any extra.

Charities can claim Gift Aid on most donations, but some payments don’t qualify.

What you need to do

You need to make a Gift Aid declaration for the charity to claim. You usually do this by filling in a form – contact the charity if you haven’t got one.

You must give a declaration to each charity you want to donate to through Gift Aid.

You can include all donations from the last 4 years. Tell the charity about any tax years where you didn’t pay enough tax.

Paying enough tax to qualify for Gift Aid

Your donations will qualify as long as they’re not more than 4 times what you have paid in tax in that tax year (6 April to 5 April).

The tax could have been paid on income or capital gains.

You must tell the charities you support if you stop paying enough tax.

Higher rate taxpayers

If you pay tax at a rate of 40% or above, you can claim the difference between the higher and basic rate on your donation. Do this:

  • through your Self Assessment tax return
  • by asking HM Revenue and Customs (HMRC) to amend your tax code

ExampleYou donate £100 to charity – they claim Gift Aid to make your donation £125. You pay 40% tax so you can personally claim back £25.00 (£125 x 20%).

With Payroll Giving, you don’t pay the difference between the higher and basic rate of tax on your donation.

 

3. Donating straight from your wages or pension

If your employer, company or personal pension provider runs a Payroll Giving scheme, you can donate straight from your wages or pension. This happens before tax is deducted from your income.

Ask your employer or pension provider if they run a Payroll Giving scheme.

You can’t donate to a community amateur sports club (CASC) through Payroll Giving.

The tax relief you get depends on the rate of tax you pay. To donate £1, you pay:

  • 80p if you’re a lower rate taxpayer
  • 60p if you’re a higher rate taxpayer
  • 55p if you’re an additional rate taxpayer

 

4. Donating land, property or shares

You don’t have to pay tax on land, property or shares you donate to charity. This includes selling them for less than their market value.

You get tax relief on both:

  • Income Tax
  • Capital Gains Tax

You can’t get Income Tax relief on donations to community amateur sports clubs (CASCs).

You must keep records of the donation to show that you’ve made the gift or sale and that the charity has accepted it.

Income Tax relief

You can pay less Income Tax by deducting the value of your donation from your total taxable income. Do this for the tax year (6 April to 5 April) in which you made the gift or sale to charity.

How to claim

If you complete a Self Assessment tax return, add the amount you’re claiming in the ‘Charitable giving’ section of the form. This will reduce your Self Assessment bill.

If you don’t complete a tax return, write to HM Revenue and Customs(HMRC) with details of the gift or sale and your tax relief amount. You’ll either get a refund, or your tax code will be changed so you pay less Income Tax for that tax year.

Capital Gains Tax relief

You don’t have to pay Capital Gains Tax on land, property or shares you give to charity.

You may have to pay if you sell them for more than they cost you but less than their market value. Work out your gain using the amount the charity actually pays you, rather than the value of the asset.

Selling land, property or shares on behalf of a charity

When you offer a gift of land, property or shares, the charity may ask you to sell the gift on its behalf.

You can do this and still claim tax relief for the donation, but you must keep records of the gift and the charity’s request. Without them, you might have to pay Capital Gains Tax.

 

 

5. Leaving gifts to charity in your will

Your will says what will happen to your money, property and possessions after you die.

Your donation will either:

  • be taken off the value of your estate before Inheritance Tax is calculated
  • reduce your Inheritance Tax rate, if more than 10% of your estate is left to charity

You can donate:

  • a fixed amount
  • an item
  • what’s left after other gifts have been given out

Writing your will

Find out how to write or update your will, including how to make sure it’s legal.

Include the charity’s full name – check with them or search the charity register in England and Wales, Scotland or Northern Ireland.