Could you be giving back? The benefits of donating to charity through your business

If you own or run a limited company, you can claim donations to a charity or community amateur sports club as a business expense.

This could allow you to report lower profits and pay less Corporation Tax, supporting important causes in a tax-efficient way.

For example, using Contractor Calculator’s Corporation Tax calculator, if your business reported profits of £300,000 in the 2024/25 tax year, you’d owe £75,000 in Corporation Tax. By donating £50,000 to charity through your business, you could reduce your profit to £250,000, and your Corporation Tax bill to £62,500.

You can claim a donation as a business expense when you give any of the following to charity:

• Money
• Equipment or trading stocks
• Land, property or shares
• Employees on secondment
• Sponsorship payments

There is no limit on how much can be written off as a charitable expense. However, it’s not possible to donate more than your total profits and declare a loss, or carry any remaining amount over to next year’s tax return.

If your company is receiving something in return for its donation, such as event tickets, the value of the benefit must be below a certain amount, as outlined in the table below.

Source: All contents are based on the current HMRC legislation, which is subject to change.

If you’re a sole trader or in a partnership, things work a little differently. You can’t claim charitable donations made through your business as expenses, so, if you pay donations from your business’s bank account, you’d need to record the transaction as personal drawings or a non-business transaction. HMRC treats it as if it’s an individual donation.

If you’re an additional or higher-rate taxpayer, you can claim the difference between the rate you pay and the basic rate on your donation through self-assessment.

For example, let’s say you donated £1,000 to charity as a sole trader. After you confirm that you’re eligible for Gift Aid, the charity can claim 25p in tax relief for every £1 you donated – in this case, that would be £250. This brings the total donation up to £1,250.

If you’re a higher-rate taxpayer, you can then claim 20% of this total donation as tax relief, reducing your Income Tax bill by £250.

Giving to charity could be an important element of your estate planning strategy, reducing the size of your estate for Inheritance Tax (IHT) purposes while supporting the charities you care about.

An Amber River financial planner could help you donate to charity in the most tax-efficient way, ensuring as much of your donations are reaching your chosen causes as possible.

As well as giving through your business, a planner can also discuss other ways to reduce your IHT liability such as leaving charitable donations in your will.

Giving to charity as a business can help you foster a happy working environment and even attract talented staff.

Research by the CAF found 47% of people said they’d be more inclined to work for a business if it donates to charitable causes.

In a separate CAF study, 48% of respondents agreed that businesses and organisations that support charities and good causes make for better employers.

So, donating through your business could help you attract and retain good employees. Allowing employees to donate their time to charity through secondment or volunteering days can also be particularly effective at boosting morale.

Giving to charity can also improve how your potential customers see you and identify with your values.

A YouGov survey found that 37% of UK consumers are more likely to buy from a brand that gives a portion of their proceeds to charity.

Charitable work can also be great PR for your company. Supporting charitable events and running fundraisers can often result in positive media coverage. This could help improve brand awareness in your local community and foster a positive company image.

In addition, it could help your business fulfil any Corporate Social Responsibility (CSR) commitments and improve your firm’s environmental, social, and governance (ESG) image.