Newspaper article Evening Gazette (Middlesbrough, England)

How Charity Can Begin at Home

Newspaper article Evening Gazette (Middlesbrough, England)

How Charity Can Begin at Home

Article excerpt

Byline: Ros Harwood, Head Of Charities Group, Dickinson Dees Law Firm

It is said that there are only two things that are certain in life ( death and taxes! That is certainly true. You live and are taxed. You die and are taxed.

So far as death is concerned, there is very little anyone can do to avoid that. So far as taxes are concerned, we seem to spend our lives thinking of ways to alleviate the burden. There are many well-rehearsed tax-planning schemes in existence, which do the job very nicely, but there is one that is often forgotten about. It not only reduces your lifetime tax bill but also saves your estate inheritance tax (IHT) when you die. What is more, if you want to, you can live forever! Perhaps that is an overstatement. More accurately, your name can live forever.

What am I referring to? I am referring to setting up your own charity.

The advantages of setting up your own charity during your lifetime are numerous. Not only are there financial benefits for you, your charity will benefit as well.

* Gift Aid

Provided you are a taxpayer, any donation you make to your charity is uplifted by the amount of basic rate tax on your gift. Therefore, if you give pounds 100 to the charity using Gift Aid in the tax year 2005/2006 that gift is worth pounds 128.20 to your charity. Subject to a few rules, you can give any amount to your charity, either on a regular basis or by a one-off payment and your charity can reclaim the tax.

There is also a benefit for you if you are a higher rate taxpayer, as you will be able to claim a relief on the difference between the basic rate (22pc) and higher rate (40pc) of tax. This means that on a gift of pounds 1000, you can claim higher rate relief of pounds 50.77 (pounds 1,282.05 at 18pc).

It is not only you who can benefit. Your family and friends will also benefit to the extent that they can donate to your charity as well.

* Allowances

When calculating any entitlement you may have to the age-related personal allowance or the married couple's allowance, the gross amount of any Gift Aid donations you make will reduce the level of your income.

* Family company

Similarly, a family business could use Gift Aid to make donations to the charity. The full amount of any such gift will reduce the taxable profits of the business, and in turn reduce the company's corporation tax bill.

There is a limit on the benefit that a close company (one under the control of five people or lower) can receive from the charity in return for the Gift Aid payment.

* Gift of Shares, Land and Buildings

In simple terms, you can claim tax relief if you give, or sell at less than market value, any qualifying investments to a UK charity. There are various types of qualifying investments, including shares and securities listed on the UK stock exchange or on recognised foreign stock exchanges, authorised unit trust shares, shares in a UK OEIC and an interest in land or buildings. …

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