You only need to watch programmes such as Children in Need and Comic Relief to realise what a wonderfully charitable lot we are in this country. From Lands End to John O’Groats, our incredible generosity knows no bounds.

Whether it be donating to the local Church, paying your National Trust subscription, signing up for a regular direct debit to a charity close to your heart or via payroll giving, most of us have made, to some extent, charitable donations.

Understanding the best way to donate is important in order to maximise relief for the charity and/or yourself. There really is the option of ‘having your cake and eating it’ as far as ensuring that the charity receives value, whilst you receive tax relief at your marginal rate of tax.

Perhaps the most recognised way to donate is through simple cash, which would include telephone payments through a debit or credit card and cheques. For every £100 that you donate, the charity is able to reclaim a further £25 from HMRC. This assumes that you have paid sufficient tax in the year to cover the reclaim. If it subsequently transpires that you do not have sufficient tax for the reclaim, you will have to pay HMRC the £25 in order for them to honour your pledge. This is because a gift aid declaration guarantees the charity the right to the tax from HMRC.

The scenario described above can be alleviated by basic planning. There is a carry back facility available so if you anticipate having no income in 2014/15 but have made a donation on 20 April 2014, a claim may be made within your Tax Return for 2013/14 (when you paid sufficient tax), which is due to be submitted to HMRC by 31 January 2015. The ability to carry back can also be efficient if in the previous year you paid tax at the additional rate (45%) but for the current year your income will be taxed at basic rate (20%). That way, you stand to receive £31.25 tax back on the £100 in the form of additional rate relief, as opposed to nil at basic rate. Once your Return has been submitted, the ability to claim a carry back of relief is lost, as no amendments to that particular section of the form can be filed thereafter.

For those of you out there who happen to be high net worth and philanthropic, there is one particular scenario that could have a huge benefit all round. Imagine that the first of your UK rental business portfolio properties is now worth £200,000 but was bought back in the 1980’s when property could be snapped up for the current price of a sports car, particularly outside London and the South East. The gain is £160,000 after deducting the original cost, costs of sale and the Capital Gains Tax Annual Exempt Amount, meaning that the tax liability as a higher or additional rate taxpayer would be £44,800. If you are feeling particularly generous, you may decide to convey the property to your favourite charity, which will have the following benefits:-

• It will be a no gain/no loss transaction meaning that the charity receives the property without any capital gains tax ever being paid. This saves £44,800 in tax that you would otherwise have paid on sale.
• The value of the property (less any consideration paid by the charity) is deductible from your taxable income, which means that in the example shown above, you would receive tax relief of an incredible £90,000.
• The charity has a property worth £200,000 and the transaction is exempt from SDLT.

The same opportunity exists for quoted shares. If you wanted to recoup your original investment, there is nothing to prevent the payment of consideration by the charity but that would, of course, mean that this is deducted from the deemed disposal proceeds.

Revisions to the mainstream Inheritance Tax legislation are less commonplace than many of the other taxes acts. However, one beneficial change that was recently made drops the rate of IHT to 36% payable on a deceased person’s free-estate where 10% of that estate is left to charity. The 10% calculation is made after reducing the amount exposed to tax through relief, exemptions and the nil rate band.

At one stage it appeared that the current government were going to limit the amount of tax relief that could be received through charitable giving to £50,000. Whilst there have been limits imposed for certain loss relief and pension contributions, common sense prevailed and charitable donations were not affected by new legislation.

Particularly in times of austerity, charities are keener than ever to receive gifts from the Great British public so if you do have the odd spare house sitting around collecting dust and you are feeling particularly generous, there may just be a way that you can help whilst mitigating the financial loss through tax relief.