There are many motivations behind giving to charities and no matter the size of the donation, it is all about making a difference, which is a great feeling. One less spoken about motivation, however, is one that is very relevant and a definite added bonus – it can save you Tax! If that’s not a win-win I don’t know what is.
So, what are your options when it comes to charity donations?
Donate from your limited company
Charitable donations can be made directly from your limited company thus avoiding the need to extract the profits first (and suffer personal tax). It will also attract corporation tax relief as the donation will be deducted from your income to calculate taxable profits. Win-win. Even more so with the new corporation tax rate if you are making high levels of profit you could be getting 25% of tax relief on your charity donations. So get sponsoring those team members charity pages (Also a great boost in morale for your staff member doing the event).
Register for gift aid
If you are donating cash as an individual, make sure you fill out a gift aid form for the charity (one small tick in a box), enabling them to add an extra 25% to your gift courtesy of the Chancellor. Gift Aid is the mechanism used to redirect your income tax away from the Treasury and to the Charity instead.
If you are a higher rate tax payer this will get added to your tax return and increase your basic rate band (more income at 20% as opposed to 40%).
Be careful though as if you are not a taxpayer (earn less than the personal allowance of £12,570) you are not a taxpayer and do not qualify for gift aid so don’t tick the box or HMRC will recoup this money from you. Specific attention is needed for sole traders who may occasionally have drops in profitability and be at risk of being below the personal allowance.
Encourage your staff
Make it easy for your staff to contribute to charity by setting up the Give as you Earn scheme through your payroll. Or allow them to volunteer in work time once or twice a year in the local community. This can raise the profile or your business, motivate your staff and you can still treat the staff cost as a business expense in your accounts.
If you have any questions on donating, please get in touch with the team.
