Charitable giving: How to make your donations go further

Charitable giving is a very personal thing, but it’s also an important part of your overall financial plan. A financial planner can help you structure your giving, so it fits naturally with your income, tax position, estate plans and long-term goals.

This isn’t only for wealthy philanthropists. Even small, regular donations can be set up in a tax-efficient way. When charitable giving is built into your financial plan, your money is aligned with your values, a key part of values-led financial planning.

If you’ve ever ticked the Gift Aid box when donating, you’ve already used one of the easiest and most effective giving tools available.

With Gift Aid, charities can claim an extra 25p for every £1 you donate, at no extra cost to you. If you pay tax at the higher or additional rate, you can also claim back the difference between your tax rate and the basic rate on the value of your donation through your self-assessment tax return.

For example, if you give £100, the charity receives £125, and as a higher-rate taxpayer, you can reclaim £25. That effectively reduces the cost of your donation to £75 while the charity still benefits from the full £125.

It’s also worth reviewing your past donations to make sure you’ve applied Gift Aid wherever possible, a simple step that helps both you and the charities you support.

Payroll Giving is another straightforward way to make your donations more efficient. It allows you to give directly from your salary before tax is deducted.

Because you’re giving from your pre-tax income, it costs you less to give more. For example, if you’re a basic-rate taxpayer and donate £10, it only costs you £8. For higher-rate taxpayers, the cost is even lower.

Payroll Giving also gives charities a regular, reliable income. The only requirement is that your employer offers the scheme, so it’s worth asking HR if it’s available.

Not all giving has to be in cash. Donating shares, investments or land can be a particularly tax-efficient form of charitable gifting, especially if you’re an investor, business owner or have inherited assets.

When you give listed shares or securities to charity:

• You don’t pay Capital Gains Tax (CGT) on any increase in value.
• You can claim Income Tax relief on the market value of the gift.

For example, if you donate shares worth £10,000 that have grown in value, you avoid paying CGT on the gain and can deduct £10,000 from your taxable income.

Not every charity can accept non-cash gifts, so it’s worth checking before making arrangements. A financial planner can help identify the best route or specialist charitable foundation to receive your gift.

Charitable giving can also help manage your taxable income, particularly if you’re close to certain thresholds.

If your income sits between £100,000 and £125,140, you lose £1 of personal allowance for every £2 earned over £100,000. This effectively creates a 60% tax rate in that band.
Making a Gift Aid donation can reduce your taxable income, helping you reclaim your personal allowance. It’s a simple way to redirect money that would otherwise go to HMRC into causes that matter to you.

It can also help families stay below other thresholds, such as the £100,000 limit for child benefit or free childcare support.

Your generosity can continue long after your lifetime. Including a gift to charity in your Will is one of the most meaningful and tax-efficient ways to leave a legacy.

Any amount left to charity is exempt from Inheritance Tax (IHT). If you leave 10% or more of your estate to charity, the IHT rate on the rest of your estate reduces from 40% to 36%.

It’s a powerful way to ensure your values live on and to pass on a spirit of giving to future generations. If you’re considering this, speak to your family and your financial planner to make sure your intentions are clearly understood.

If you want to give in a structured way without setting up your own foundation, a Donor-Advised Fund (DAF) could be ideal.

A DAF acts like a charitable account. You make a lump-sum donation, receive immediate tax relief, and then recommend grants to your chosen charities over time. You can remain anonymous if you prefer, and the administrators handle all the compliance and reporting.

DAFs are growing in popularity with families who want a flexible, long-term approach to charitable giving and gifting.

As your circumstances and priorities change, it’s worth reviewing your charitable giving to make sure it still reflects your goals and financial position.

A regular conversation with your planner helps ensure your generosity continues to have the greatest possible impact, both for you and for the charities you support.