As a company becomes more successful and turns over more profit, many business owners choose to considerable charitable giving to support a local community or cause, or whichever charitable cause is close to them.

Whilst tax relief on charitable giving is often not the catalyst or reason for it, businesses should consider how they can make tax-effective gifts, and indeed, ways in which they can involve willing employees. There are many ways to donate effectively, of which a few are explained here.

Gift Aid – taxpayers can give via the Gift Aid scheme; an amount of money can be donated to a charity of choice, which can, in turn, reclaim basic rate tax from HMRC on this gift, enhancing the value of the donation. A £10 donation will be worth £12.50 to the charity. The beauty of this method is that any amount, on any frequency basis, can be donated.

Payroll Giving – this scheme allows regular donations to charity straight from the employee pay packet, on which tax relief is given on these amounts. The employer has to set up and run the scheme and the employee must give authorization to the employer for the donation to be deducted from the salary. The employer pays the donation via an HMRC-approved Payroll Giving agency which distributes the money to the charity. The benefit to the employee is tax relief immediately at the highest rate of tax (this does not affect the amount paid in national insurance contributions).

Fund-raising events – encourage employees to take part in events to raise money for a chosen charity, which could be a local cause to boost a sense of community. Again, it is best to donate the final amount via Gift Aid so the charity can benefit. 

Higher rate and additional rate taxpayers – these can claim, through the tax return, relief on the difference between the basic rate and higher/additional rate of tax.

Gifts of shares or land – this negates capital gains tax if land or shares are donated to charity. It is advisable to seek professional help if embarking on this route.