In the realm of tax reduction, charitable giving can play a key role. There are three primary methods through which your contributions to charitable organisations can assist in diminishing your tax liability ...
- Gift Aid - This scheme is advantageous for reducing your income tax or capital gains tax. When you make a donation through Gift Aid, the charity can claim an extra 25p for every £1 you give. This means that your £1 donation is, in effect, worth £1.25 to the charity. Additionally, if you pay tax above the basic rate, you can claim the difference between the rate you pay and the basic rate on your donation.
- Payroll Giving - Also known as Give As You Earn (GAYE), this method enables you to donate directly from your salary before tax is deducted. This means that you only pay tax on the remainder of your salary, effectively reducing your income tax.
- Legacy Donations - By leaving a charitable donation in your will, you could potentially reduce your inheritance tax. If you leave at least 10% of your "net estate" to a charity, you can cut your Inheritance tax rate from 40% to 36%.
As always, it's advisable to seek professional advice to ensure your tax planning and tax reduction align with your personal circumstances and goals.
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