Financial Gifts and the Tax Year End
Many clients that join Castlefield do so because they share in our over-arching mission of using assets to do good. While we are able to ensure that our clients’ money is invested in line with their personal values, they often reflect this through their own personal giving.
When we consider giving with our clients this predominately takes on two forms: charitable giving and making financial gifts to family. With both, there are considerations to be made at tax year end.
Charitable Giving and Gift Aid
When making donations to a charity it is important to remember Gift Aid. In short, Gift Aid allows UK charities to increase the value of donations they receive by 25% through reclaiming tax. The primary aim is to incentivise donations; however, it is still estimated that each year £600 million in available Gift Aid is unclaimed.
To be eligible to claim Gift Aid there are two main criteria that must be met: you must be a UK taxpayer and the amount of a claim cannot exceed the tax you pay in that tax year. In addition to this, it’s important to remember that you are able to claim Gift Aid on donations made in the past 4 years.
In order for a charity to claim Gift Aid on a donation they must receive a Gift Aid declaration from the donor. The declaration must include a description of the gift, the name of the charity, the donor’s full name and the donor’s address. Further information on declarations, including examples, can be found here: www.gov.uk/claim-gift-aid-declarations
Financial Gifts to Family
There are many reasons people may wish to make a cash gift to their loved ones. For example, it could be to provide help for a house deposit, university fees, or for a wedding gift. Gifting cash, however, can have substantial tax implications. Gifts are taxed to prevent people deliberately avoiding inheritance tax by giving away all their assets before they die.
There are various allowances available for making gifts, however, the full extent of these exemptions is beyond the scope of this article. Each year you are able to make a gift of £3,000 without any inheritance tax consequences and this allowance can be carried forward for 1 tax year if unused. In addition to this, small gifts of £250 or less and gifts to qualifying charities are also exempt from inheritance tax. Further allowances are available for wedding and civil partnership gifts and regular gifts that are paid out of income.
Below is a link to Castlefield’s Personal Taxation Table which covers the full range available allowances when gifting. Broadly speaking, any gift that is made seven years or less before death that exceeds these allowances may be liable for inheritance tax.
Castlefield Personal Taxation Table
Philanthropy
Alongside giving cash gifts to loved ones or leaving money to a charity in a will, a number of people wish to give more money away to charitable causes during their lifetime but aren’t quite sure how best to go about this.
For those interested in philanthropic giving, further information on how Castlefield can assist you with this can be found here. https://www.castlefield.com/individuals/philanthropy/
Alternatively, please contact us directly if philanthropy is something you'd like to explore.
https://www.charityexcellence.co.uk/Home/BlogDetail?Link=Claim_HMRC_Gift_Aid_For_Charities
This article is for information purposes only and is not intended to constitute a personal recommendation or inducement to invest. The financial products or investment strategies discussed in this article may not be appropriate for all investors. All information quoted is obtained from sources which we believe to be accurate at the time of publication, but may be subject to change. We therefore cannot be held responsible for the implications of relying on this information.