A guide to tax on fundraising
Around £10 billion is donated annually in the UK, spread out amongst 166,000 registered organisations. To get the most out of each donation, whether large or small, charities need to be aware of what tax reliefs are available and how to claim them.
Are fundraisers tax deductible?
If a UK taxpayer makes a charitable donation to a UK registered charity, then the money received is tax exempt and will not be subject to any taxation come April. Only dividend and land profits are taxable, along with the VAT of certain purchases.
The benefits do not end there, though. If the donation qualifies as Gift Aid, and it’s elected by the donor, then the charity can reclaim 25% of the donation from HMRC. For example, if £240 was donated, the charity not only pays zero taxes on fundraising, but they can actually reclaim £60 from HMRC later on.
The benefits are similar when the donor is a company, though there are some differences. Because companies do not pay the basic rate of tax, and they can directly claim corporation tax relief on the donation, there is nothing to physically claim back for the charity. The benefits still exist, though. If a company donated £240, it is actually only costing them £192 due to a £48 tax relief. So in essence, a £192 in company cash outflow has resulted in £240 in charitable income for the cause.
Sponsored challenges, charity membership, selling donated goods, events and volunteer expenses all have special rules for claiming Gift Aid – there are also some donations where it cannot be claimed.
As of 6 April 2019, these are the limits of Gift Aid amounts:
|Donation||Maximum benefit value allowed for Gift Aid|
|Up to £100||25% of the donation amount|
|Over £100||£25 plus 5% of the donation over £100|
|Overall benefit limit||£2,500 (maximum benefits that can be provided in a tax year)|
Tax relief for the donor
Who’s to say that charitable giving can’t have personal benefits? Some believe good deeds are to be repaid in good karma, but gifting money can also have some fiscal benefits for both yourself and the charity.
Donors will receive a tax relief on donations if they are in the Higher or Additional rate of tax bracket. They’ll be able to claim 20% in tax, whilst Basic rate taxpayers aren’t entitled to relief.
As previously mentioned, company donations can qualify for corporation tax relief as well. Assuming the corporate tax rate is 20%, this is what’s relieved from the tax burden from donations.
Your company’s donation will not qualify for tax reliefs if:
- The donation is to favour certain conditions such as buying future property from the company
- It’s a loan expected to be repaid by the charity
- The donation is a distribution of profits, such as dividends
Dealing with charity tax matters can seem complicated at times, but it doesn’t have to be. Our mission at GoodBox is to make fundraising more effective through technology and data-driven decision making, and we’re harnessing both to help charities manage Gift Aid. Combining our contactless donation tech with SwiftAid software, we automate the Gift Aid process on contactless donations for registered charities and donors ensuring you never miss a beat. This cuts down on time-consuming admin for charity staff, and ensures that donation income increases – all whilst being entirely GDPR compliant. Find out more here about how our contactless Gift Aid solution can benefit your charity.