Making Donations Personally
If you have made any personal donations via gift aid, you can claim tax relief for these payments through your personal tax return. By donating via gift aid, the charity will have reclaimed 25% extra on your donation. This is equivalent to 20% of the gross figure overall. So, for example, if you personally donated £80 gift aid, the charity would receive £100.
Please note that if you do not pay any tax due to earning below the tax threshold, you would need to repay HMRC, the tax the charity has claimed.
Basic rate taxpayers will not obtain any additional relief as the charity has claimed the 20%. Higher-rate taxpayers will get additional relief. It is essential you keep a record of such gifts as the gift aid also counts towards extending the £50k threshold for repayment of child benefit and the £100k threshold for extending the point at which your personal allowance is withdrawn.
Tax tip! If you are giving alongside a spouse and one of you is a basic rate taxpayer and the other a higher rate taxpayer, you would save tax by donating in the name of the spouse who is the higher rate taxpayer.
However, if you have a company making profits that you are also drawing income from, you will likely be better off donating via the company instead.
Making Donations via a Company
Company donations to registered charities are deductible business expenses for corporation tax. However, if your company or a 'connected' person gains any benefit from doing so, there are restrictions. We recommend you identify the recipient and registered number of the charity for any donations in your bookkeeping. A charity can be UK registered and perform all its charitable work abroad.
Non-UK registered charities
Until 1 April 2024 the Finance Act also allows charities of relevant territories to qualify as charities for the purposes of UK legislation, where they would be a registered charity if based in the UK. Relevant territories are those in EU Member States, Iceland and Norway. From April 2024, all non-UK charities and CASCs will no longer be eligible to claim UK charitable tax reliefs.
Gift aid does not apply to Companies. Unlike donating personally, if you made an £80 gift aid donation via your company, the charity would receive £80.
No Sales or Loss making companies
You should not donate via your company if it is making a loss.
Which is better – donating personally or via my company?
In most cases, you will be better off for tax purposes if the company is donating rather than you personally, providing it is paying corporation tax on profits. It is tax efficient because any personal payment to a charity is born out of double-taxed income. You will have likely paid tax on dividends or salary after the company has already paid corporation tax on profits.
However, you cannot get tax relief for a charitable donation if your company is making a loss in the same year. In those circumstances, it would be better to pay personally, providing you have a sufficient income subject to income tax.
Buying and gifting items
We wouldn't advise buying and gifting items as it could be challenging to prove to HMRC if they investigated. Ideally, you would need proof from the charity to verify they received it, and HMRC would likely disallow any VAT claim on the purchase.
Sponsoring via Justgiving or other good causes
Since you can only get tax relief to registered charities, any payment, even for a good cause, will be deemed personal. If you do this via your company, it will need to be repaid.