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Charity urges donors to plan ahead

18 February 2013

While the drop in the top rate of income tax from 50% to 45% will be welcomed by most in this tax bracket, a flipside for donors means the Chancellor will be providing less personal tax relief on payments they make to charitable organisations.

For example, in the tax year 2012/13, a donation of £80,000 to charity provides an additional rate tax payer with personal relief of £30,000, making the actual cost of the donation £50,000. In 2013/14, with the introduction of the 45% additional rate of tax, the same donation would offer personal tax relief of £25,000, making the actual cost to the donor £55,000. The difference between £50,000 (2012/13) and £55,000 (2013/14) represents a 10% increase in cost to the donor.

For anyone thinking of making an exceptional gift to a charity or setting up a charitable trust, then the cost could be significantly more in the new tax year. For example, a lump sum transfer of cash or shares worth £500,000 to a registered charity or into a charitable trust would mean the additional cost to the donor will be as much as £31,250.

One option is for donors to put aside charitable funds that they intend to donate over the next year into a Foundation Scotland Charity Account. This effectively allows donors to “park” charitable funds and distribute them typically over a 1 – 2 year period using a charity chequebook. Funds can also be transferred to a private charitable trust.

Foundation Scotland also specialises in setting up light-touch charitable trusts where the burden of appointing trustees and regulatory reporting is taken on by the charity, leaving the donor free to enjoy his or her philanthropy. The Foundation does not charge donors to set up the charitable trust, but instead takes a small annual charge based on value of the trust and the number of donations made.

Daljit Singh, Head of New Development commented “Foundation Scotland offers a simple and tax-efficient way for people to give to causes that they care about, with the minimum of fuss. Donors decide which charitable projects they wish to support and when and how much they wish to donate.”

“By planning ahead and setting up a Foundation Scotland Charity Account or Charitable Trust this will not only benefit the donor but ensure that we maintain the same levels of giving at a time when every penny can make a real difference.”

For further information on the Foundation Charity Account or Charitable Trust telephone 0131 524 0300.




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