April 16 2014 Latest news:

Increasing what we give to charity is easy – and, best of all, it’s free.

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The government has announced plans to encourage shoppers to make donations whenever they pay by card or use cash machines. Critics have branded the proposal a gimmick, but there is another way we can boost what we give to good causes without it costing us a penny.

Registered charities are losing out on nearly £900m a year simply because of people’s failure to make their donations tax-efficiently. According to Unbiased.co.uk, this is because we are not making the most of tax breaks and, as a consequence, we are wasting millions of pounds.

Last year, adults in the UK gave a total of £9.9bn to charity. However, according to Unbiased, that sum could have been boosted by nearly 9pc if we had made the most of tax-efficient donation schemes.

That means that more than another £870m would have been handed over by the taxman if only donors had made better use of schemes such as Gift Aid and payroll giving.

Gift Aid involves a charity claiming basic-rate tax on your contribution from the government. In effect, this makes your donation tax-free, although it is the charity that benefits rather than you directly. For example, if you give £10 using Gift Aid, the charity will receive £12.50, which includes a 20pc basic-rate tax rebate (£2.50) from the government.

Meanwhile, payroll giving (or Give As You Earn) allows employees to make regular contributions directly from their payrolls. Payments for the charity are deducted by your employer before tax is deducted. Again, this means that if you want to make a donation equivalent to £10 of your taxed income, the charity will actually receive £12.50.

Research by investment management firm Brewin Dolphin suggests consumers remain committed to charitable giving despite the ongoing uncertainty with the economy, with more than half of us intending to give as much or more to good causes in 2011 than we did in 2010. Taking advantage of one of the tax-efficient ways of giving will boost these sums even more.

Karen Barrett, chief executive of Unbiased, said: “Although UK taxpayers are experiencing tough times, there are still millions of people donating to charity in a typical month.

“With just a few simple changes to the way they make their payments, many could give even more to their chosen charities.

“Increased awareness of tax-relief schemes would significantly impact the amount currently being wasted. Whether you donate monthly or contribute one-off amounts, no matter how big or small, using the most tax-efficient methods of making donations will ensure worthy causes get the maximum amount of money possible.”

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