You can receive tax relief for charitable gifts under the Gift Aid, the Give As You Earn scheme, or by using a scheme such as the Charities Aid Foundation Account.

For Gift Aid you simply declare to the charity that you pay enough UK tax to cover the basic rate tax due on the gift, and the charity reclaims that tax from HM Revenue & Customs. For a gift of £80 you must pay at least £20 in UK tax. Any relief for higher or additional rate tax is obtained by making a claim on your tax return. You can also elect for the gift to be treated as paid in the previous tax year.

Gift Aid is also available to companies. However, donations are made gross and then deducted from profits when calculating the corporation tax liability. The company must be profitable when it makes the gift, because the gift cannot be carried over to another accounting period, or added to a loss. The tax relief is restricted where the company, or a connected person, receives a benefit from the charity.

If your marginal income tax rate is higher than the rate paid by your company, it makes sense for you personally to make charitable gifts, rather than have your company make the donations.

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