Inefficient giving costs charities nearly £1 billion

UK charities missed out on nearly £1 billion in donations last year - £101 million less than the previous year - as a result of tax-inefficient giving by generous donors.

Research from Unbiased.co.uk, the online Find an IFA Search, shows that donors could be doing more to support charitable funds without wastefully allowing the taxman to claim nearly £1 billion that could be going towards good causes.

In 2007/08 UK adults gave a total of £10.6 billion to charity; however 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 nearly 10% (i.e. nearly £1 billion), if donors had made the most of the tax allowances available to them.

Brits can tax efficiently donate to charity via Gift Aid. 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. Gift Aid is most commonly utilised by larger donors (i.e. those who give more than £100 per month), however figures reveal that the proportion of donations of £100 or more that used Gift Aid has dropped from last year's peak of 70% to 64%.

David Elms, Chief Executive of Unbiased.co.uk commented, "With almost 28 million Brits donating to charity in a typical month, UK taxpayers remain very generous with their donations. Despite fears of recession looming, many individual donors have increased their charitable support in 2007/08, but it is unfortunate that not all donations are being made in a tax-efficient manner. Nearly £1 billion is going to the tax man when this could be easily avoided by making use of Gift Aid."

Payroll giving (Give as You Earn) is another tax efficient form of donating to charity. This scheme allows employees to contribute a regular sum, taken out of their salary by their employers and given to the employees chosen charity.

Elms continued, "Using the most tax-efficient methods of donation allows those who are very active in philanthropy, and also those who give one-off gifts in response to specific events, to ensure the worthy cause gets as much money as possible. 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."