Taxman is bagging £808 million of charities’ money

UK charities lost out on more than £808 million last year - £117 million more than the previous year by those giving to good causes not doing so tax efficiently. These numbers are revealed in research from Unbiased.co.uk, the website promoting the benefits of independent financial advice.

Last year UK adults gave a total of £8.2 billion to charitable causes; according to Unbiased.co.uk’s annual ‘TaxAction’ report (part of the campaign looking at the total amount we waste in tax each year). This amount could be bolstered by an extra 10% (i.e. £808 million), if donors had made the most of the tax allowances available to them.

Around 10 million UK adults gave money to charity in a planned and tax-efficient way (i.e. through payroll giving, or Gift Aid) regularly last year. Payroll giving (Give as You Earn) allows employees to dedicate a regular sum, taken out of their pay by their employers and given to their own chosen charity/ies. Despite this simplicity, four in five employees who donated more than £5 a year to charity did not do so via their payroll giving scheme; as a result Unbiased.co.uk research estimates that UK charities missed out on an additional £216 million in tax refunds last year.

Gift Aid is a form of opt-in tax relief on money donated to UK charities, whereby the charities can reclaim basic rate tax on a donation. Small, one-off donations very rarely make use of Gift Aid; this oversight may not be significant at the level of just one person, but across the UK population it generates tax waste of £303 million. However, Gift Aid is also under-utilised by around two thirds of larger donors (i.e. Who give more than £100 per month). This failure to take advantage of the tax breaks engendered by Gift Aid results in unnecessary tax payments of £289 million.

David Elms, Chief Executive of Unbiased.co.uk commented, “People’s generous donations to charity have increased again this year, making it even more important for our good intentions not to go to waste. By using the most tax-efficient methods of donation, we can ensure this wasted tax goes towards charitable donations to those people who will most benefit from them. A visit to an independent financial adviser can help you take control of your finances, and plan both your personal finances and donations tax-efficiently. No matter how small or large your donations, charities will always be grateful for you using the most tax effective way of making the donation.”