The Benefits and Requirements of the Charitable Donation Tax Deduction

Posted by Amit Gupta on July 12th, 2024

If you're contributing to charitable causes—whether as an individual or as an organisation—you may be entitled to unique tax incentives. Charity accountants in London can guide you through your options and maximise your benefits.

If you are new to making charitable donations and unsure about what tax deductions apply, this guide is for you. Keep reading to learn the benefits and requirements involved.

UK taxpayers

The Gift Aid scheme allows charities to increase the value of donations from UK taxpayers. When a taxpayer donates £1, the charity can claim an additional 25p, making the total donation worth £1.25.

For higher-rate taxpayers who pay 40% tax, there's an opportunity to claim back 20% (the difference between their rate and the basic 20% tax rate) on their donations.

Charity accountants in London can guide donors on applying tax relief to cash donations made in the previous tax year. It's important to note that these donations must be completed before filing the tax return for that year.

Tax relief is also available for donations of certain assets to charities. These assets include:

• Shares or securities listed on a recognised stock exchange or AIM
• Freehold or leasehold property in the UK
• Units in authorised unit trusts and open-end investment companies

When donating these assets, the donor can deduct their market value from their taxable income. This deduction is claimed through their tax return. As a result, basic-rate taxpayers can save 20% on their taxes, higher-rate taxpayers can save 40%, and additional-rate taxpayers can save 45%.

Tax incentives for charities

The Gift Aid Scheme provides tax relief for charities on donations they receive. This benefit is available for donations made to UK-registered charities and to charities in other European Economic Area (EEA) countries. Even after Brexit, the tax relief for donations to EEA charities remains applicable under certain conditions.

Confused about charity tax deductions?

Charity accounting is among the specialities of Allenby Accountants, making them the best company to call for advice. You can also depend on them for other services, such as bookkeeping, personal taxes, account preparation, and audits. Call 0208 914 8887 to set up a free consultation with one of their charity accountants in London.

About the Company:

Amit Gupta, Director, Allenby Accountants.

Allenby Accountants is an independent accounting firm in Uxbridge, the western part of London. Our team provides financial services and professional advice to assist you in achieving your business goals. We cater to various small and medium-sized businesses across London and assist them in maximising their wealth and minimising their expenses. Our services encompass bookkeeping, accounting, VAT management, tax management, tax planning, succession planning, inheritance tax, capital gains tax, and more. Our specialisations include serving sectors such as professional services, retail industry, medical and healthcare, property and construction industry, charity, and not-for-profit organisations.