Charities are an integral part of our society. We can also see their importance in the priorities of our government in the current crisis. For example, the government has earmarked £ 750million to support the work of frontline charities during the COVID 19 pandemic. Others, including businesses and individuals, are donating to charities for support various good causes.
What are the benefits for businesses in donating to charities? And for individuals? Let's take a closer look at five financial benefits of giving to charities.
Gift Aid & Income tax relief
You will get tax relief when you donate to a charity.
For all taxpayers regardless of their tax rate (basic, higher or additional rate):
If the charity you are supporting asks for gift assistance, the amount you donated to the charity is increased by 25% to support the cause you care about.
If you are an additional rate taxpayer or a higher rate taxpayer, you receive a tax refund equal to the tax paid on your donation, minus the amount of the base gift aid rate on your donation. donations.
Finally, if you donate to a charity by donating on payroll, the amount you pay directly from your salary will not be taxed.
Reduced rate of IHT for your beneficiaries
You will need to define on your will determines what will happen to your money, property and property after your death.
If 10% or more of your net worth is donated to charity, the tax rate imposed on the estate is reduced to 36%. Note that the standard rate is 40% and that it is attributable to the part of the estate above the threshold.
Capital gains tax relief
When you donate land or properties to a charity, you do not have to pay a CGT on these donations.
Corporation tax relief
The corporation tax that a business pays is calculated based on the profit it makes in the business year.
When the company donates to charities, it does not pay corporate tax on the amount donated to charities. They can also claim tax relief by deducting the value of your donations from your company's total profits before paying tax.
Donations to charities are not necessarily monetary. The business can donate goods or equipment that it manufactures or sells. It can also make including land, property or stock, seconded employees to the organization, or sponsorship payments.
So doing a good deed by making financial or in-kind donations to charities has some significant financial benefits. In order to benefit from all the tax breaks to which you are entitled, communicate your donations to your chartered accountant when he takes care of your tax return.