Giving to charity is rarely about the tax — but structured well, the tax relief means more reaches the cause and less is lost along the way. The rules differ depending on whether the gift comes from your company or from you personally, and a few well-used reliefs (gifts of shares, Payroll Giving, charitable legacies) are routinely overlooked. This guide covers tax-efficient giving for UK companies and their directors.
Donations from your company
When a UK company makes a qualifying donation to a charity, it pays the full amount across and deducts it from its total profits before Corporation Tax. In effect the company gives gross, and the cost is reduced by the Corporation Tax saved — currently 19% to 25% depending on profit level. The donation must be a straightforward gift: relief is restricted if the company receives a meaningful benefit in return (sponsorship with advertising value is treated differently and may instead be a deductible business expense). Donations cannot create or increase a trading loss.
Personal donations: Gift Aid and higher-rate relief
When you give personally under Gift Aid, the charity reclaims basic-rate tax — turning your £100 gift into £125 for the charity at no extra cost to you. If you pay tax at the higher (40%) or additional (45%) rate, you reclaim the difference between your rate and the basic rate through your Self Assessment return. On that £100 gift, a higher-rate taxpayer personally recovers £25. Two points owners regularly miss:
- You must have paid at least as much UK Income or Capital Gains Tax in the year as all charities will reclaim on your donations — otherwise the shortfall is payable by you.
- Gift Aid donations can also reduce your adjusted net income, which can restore personal allowance or child benefit and pull you below a tax threshold — a valuable side-effect for owner-managers who control their own dividend timing.
Payroll Giving
Through a Payroll Giving (Give As You Earn) scheme, employees and directors donate straight from gross pay, so relief is given immediately at their highest rate with nothing to reclaim later. It is one of the simplest ways for a director to give tax-efficiently and a low-cost benefit for a company to offer its payroll population.
Gifts of shares, securities and land: the double relief
One of the most generous and least-used reliefs. If you give qualifying shares, securities or land to a charity, you can deduct the full market value from your taxable income and the disposal is exempt from Capital Gains Tax. For a higher-rate taxpayer gifting appreciated listed shares, the combined Income Tax and CGT relief can cover a very large share of the gift's value — a far more efficient way to give than selling the shares, paying CGT, and donating the cash.
Charitable legacies and inheritance tax
Gifts to charity on death are free of inheritance tax. Better still, if you leave at least 10% of your net estate to charity, the IHT rate on the rest of the estate falls from 40% to 36% — so a well-drafted will can increase the charitable gift while reducing the tax on what passes to family.
How PushDigits can help
We help directors and companies give in the most tax-efficient way — coordinating corporate donations, Gift Aid, share gifts and legacy planning with the rest of your tax planning. Get in touch to structure your giving, or book a planning call.