Tax reliefs for charities and donors dip – individuals urged to support the causes they really care about

Data published today by HMRC shows that for the tax year ending April 2021, tax reliefs for charities and their donors fell compared to the previous year by £0.1 billion, to £5.7 billion. Julia Rosenbloom, tax partner at Smith & Williamson comments:

“Many charities have had a really tough time during the pandemic as a result of strains on household income and restrictions on fundraising events. On the one hand it’s positive to see that – in a publication covering the first full year of data affected by the pandemic – the total value of the reported tax reliefs on charitable donations remaining broadly steady. However, overall there has been a slight fall in reported tax reliefs for charities and their donors and this will have an impact for some good causes. It’s more important than ever for people to support the causes that they really care about. Charities do vital work in communities across the country and when individuals donate in the most tax efficient way possible, good causes benefit more.

“Last week’s Budget was light on major personal tax announcements, with no major changes on capital gains tax or inheritance tax. Whilst the government announced a 1.25% increase in national insurance and taxation of dividends from 6 April 2022, it may be that there is more pain to come in the short to medium term; the Chancellor’s extensive spending plans need to be paid for. With the outlook for personal taxes far from certain, I’d encourage people to continue to carefully consider their tax planning and make the most of current allowances before further possible changes are introduced.

“Gifting to charities can provide relief which can reduce an individual’s income tax liability. Gifts to qualifying charities are also exempt from inheritance tax and if an individual leaves broadly 10% of their estate to charity in their Will, their estate would only suffer a 36% inheritance tax rate, rather than the usual 40. Those feeling particularly generous could even consider setting up their own charitable trust, claiming appropriate tax reliefs so that as much as possible goes into the pockets of the charities.”