Giving to charity is enormously rewarding in several ways, enabling you to support causes you’re passionate about, as well as ensuring a legacy is put towards something meaningful.
Doing so in a tax-efficient way also means you can significantly increase what you’re able to give to charities close to your heart.
Below is a breakdown of the ways you can take part in tax-efficient charitable giving.*
1. Gift Aid
Gift Aid is the most common and simplest process for giving tax-efficiently to charity. All it requires is that you are a UK taxpayer. By confirming this, the charity will be able to claim an extra 25p for every pound you donate.
There is nothing extra for you to do to ensure Gift Aid, other than checking the box when making a donation. Some charities may ask you to fill out a longer form, but that is all.
It's not just charities that can claim Gift Aid - community amateur sports clubs (CASCs) can also do so.
Please note that the figures differ slightly in England, Wales, and Northern Ireland compared to Scotland, as Scotland has different income tax rates.
2. Higher rate tax relief on Gift Aid
An important but lesser-known aspect of Gift Aid is that if you are a higher-rate or additional-rate taxpayer, you can claim tax relief on your 40% or 45% income tax rate, depending on your marginal rate.
For example, if you are a higher rate taxpayer and give £100 to a charity, the charity will receive £125 as it can claim £25 in Gift Aid on your donation. You can then personally claim back £25 from HMRC as a higher rate taxpayer. This means that, in effect, the charity gets £125, and you only have to give £75.
If you fill out a self-assessment tax return, you can claim through that each year. However, if you do not routinely complete one, you can instead contact HMRC to claim back up to £5,000 in relief. If the relief due exceeds £5,000, you’ll need to make the claim in writing. For amounts over £10,000, you will also need to tell HMRC the date you donated and to whom.
3. Donating from income
Some, but not all, employers offer a Payroll Giving scheme, allowing you to donate to charity while receiving tax relief.
The money can be donated from your gross salary, which means it works similarly to pension contributions, eliminating the need to claim back tax.
For every £1 you donate, it will cost:
80p if you’re a basic rate taxpayer
60p if you’re a higher-rate taxpayer
55p if you’re an additional rate taxpayer
It is important to speak to your employer to see if they offer such a scheme or if they would consider introducing it if enough colleagues showed interest.
4. Leaving a bequest
A potentially more complicated but equally impactful area is leaving a bequest to a charity in your will as part of your estate.
Giving to charity from your estate offers an opportunity to leave a lasting legacy and make a significant difference to charities and the people they help. The government offers significant tax-efficient incentives to assist in leaving a charitable legacy, which can potentially reduce your inheritance tax (IHT) bill. There are a few ways this can work:
By leaving a gift in your will that equals over 10% of the total value of your estate, you will qualify for a reduced IHT rate of 36% (compared to 40%).
You can also give assets such as property, investments or valuable personal items to charity. Doing so exempts these assets from IHT, and their value will not be included in your estate’s value as assessed by HMRC.
It is also possible to set up a charitable trust, in which assets placed will be exempt from IHT. However, this is a complicated process and should not be approached without professional assistance from a financial planner.
5. Donating assets to charity
Less well-known than gifting to reduce an estate’s IHT liability is the ability to donate land, property or shares to charity and receive tax relief on both income tax and capital gains tax (CGT).
Donating such assets allows you to deduct the value of the donation from your total taxable income, and you also won’t have to pay CGT on assets given to charity.
However, not all charities are equipped to receive assets as donations. Some may ask you to sell the asset on their behalf. You can do this and still claim the relief once you donate the proceeds, but you must keep records of the gift and the charity’s request to claim via self-assessment.
Final thoughts
Giving to charity is a noble and often highly rewarding pursuit, especially when you know your hard-earned money is going to causes that matter to you.
That being said, ensuring that you give tax efficiently is crucial to avoid accidentally falling foul of HMRC’s rules. It’s best to go through the process with the guidance of a financial planner, who can assist you at every step. This way, you can feel confident that the charities you care about will make the most of your generous gift.
*Information correct as of June 2025 but subject to changes depending on Government policy.