New figures released from a Charities Aid Foundation research paper indicate the total amount given to charity increased by 12 per cent in 2012/2013, up by roughly £800 million on the previous year.

On the back of this good news for the sector and in the interest of supporting the upward trend, it may be worth reminding donors of the following tax incentives for giving:

Inheritance Tax (IHT)

  • Any gifts left to charity on death under the terms of a Will are exempt from IHT
  • If an individual gifts 10 per cent or more of his net estate to charity, the rate of IHT on the remaining estate (the amount over and above the available allowance currently standing at £325,000 for an individual) is reduced from 40 per cent to 36 per cent.
  • Any lifetime gifts to charity pass immediately free of IHT (contrast this with a lifetime gift to an individual that must be survived by at least seven years in order for it to be seen to have left the donor’s estate for IHT purposes)

Capital Gains Tax (CGT)

  • Any gifts to charity of land, property or qualifying shares that have increased in value from the date of acquisition to the date of transfer will not be charged CGT on the gain (a gain on a gift to an individual on the other hand would be subject to CGT at 18 per cent or 28 per cent depending on their taxable income and gains).

Income Tax

  • As long as the donor makes the appropriate Gift Aid declaration, charities are allowed to reclaim the basic rate of income tax (currently 20 per cent) on donations made to them by UK taxpayers, increasing the amount of the donation
  • Gift Aid has the following advantages for donors:
    • They are able to give more without paying more
    • Higher rate taxpayers can claim higher rate tax relief on their donations
    • The gifts reduce taxable income so age related allowances and tax credits may increase

For other ways of encouraging donations, it may be worth reviewing the points made in the Applying Behavioural Insights to charitable giving paper prepared by the Charities Aid Foundation (See CAF Nudge Theory