Tax effective giving
With the Spring 2022 Budget next week, Gill Moody reflects on tax effective giving and why it matters in fundraising.
Since the wool export tax of 1203 and wine tax of 1275, taxes have been a feature of life in the UK. In England, a Poor Law tax was established in 1572 to help the deserving poor, and then changed from a local tax to a national tax in 1601. Income tax was levied for the first time in 1798 to pay for weapons and equipment leading up to the Napoleonic Wars.
Tax-effective giving lies at the heart of any discussion about balancing the provision of public benefit by the state and the charitable sector. It is a way of directing our taxes towards those causes that are important to us.
I remember when I first started out as a fundraiser in 1986, Gift Aid wasn’t in evidence and the only way of reclaiming tax was through covenants- spread gifts over a number of years or through a deposited covenant – a means of making a single gift. Now we have a range of methods of giving tax-efficiently at our disposal: Gift Aid, legacies, the double benefit of share and property gifts which attract both exemption from capital gains tax and tax relief.
Since the very early days, deployment of these has been central to Craigmyle Consultants’ work to help clients maximise income to a charity or appeal. I remember in the early days of share giving a gift of £100,000 worth of dotcom shares to an appeal I directed which we reckon “cost” the donor only around £20-30,000 to give.
The spring budget is on its way. It is worth remembering the not too distant past. In the Second World War, the highest rate of income tax peaked at a staggering 99.25%. Margaret Thatcher cut the higher rate of tax from 83% to 60% and the basic rate from 33% to 30%. Subsequent reductions have brought us to the present position of 40 or 45% for higher earners and (since 2007) 20% basic rate.
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