Smart Giving

Plenty of fortunes have been made in the last few years by successful entrepreneurs. Many have followed the well-worn path of philanthropy, encouraged by the UK tax system which favours those who give to charity.

Some of the most tax efficient ways of giving to charity include:

• Gift Aid: As long as donors make a Gift Aid declaration, the gift is eligible for income tax relief. The charity can recover the basic rate of income tax paid on the “grossed up” amount of the gift. Higher rate taxpayers can claim back the difference between basic and higher rate tax


• Gifts of property and certain listed shares/securities: These qualify for income tax relief at up to 40% of the market value of the assets given, as well as capital gains tax (CGT) exemption. However, sometimes it may be more tax-efficient to sell the assets, pay the CGT and then give the net sale proceeds to charity under Gift Aid


• Payroll Giving Scheme: Employees can authorise their employer to deduct part of their salary and donate it directly to a charity of their choice


• Inheritance Tax (IHT): Gifts to charities are exempt from IHT, whether made during one’s lifetime or on death.

Some donors prefer to establish their own charity, which then usually makes donations to their favoured charities. As well as offering all the tax advantages, a family charitable trust or foundation provides a flexible longterm philanthropic vehicle which assures public recognition of the donor’s generosity.

Tamasin Perkins
Tel +44 (0)20 7440 7420
tamasin.perkins@mishcon.com