The benefits of your company donating to charity – more than a tax break

It seems that all charities need our support more than ever. Whether providing services linked to the cost-of-living crisis, mental health demands, pressure on the NHS and educational services, or animal shelters – the demand for support has increased, and funding has decreased.

Now is a great time to consider whether you can support a charity through your business. And you may be surprised by the benefits not only to the charity, but to you and your business.

Tax Relief

Any business donation to a charity can give you a tax break – or tax relief. This benefits the charity – as well as you.

Tax Relief as a sole trader or partnership

If you donate to charity via Gift Aid, the charity can reclaim the basic rate tax on your donation. This allows the charity to gain more money, and for you to pay less tax. This is normally as simple as ticking a “Gift Aid” box when you make an online donation or on a paper form.

If you donate £10, as a basic rate taxpayer, the charity will claim £12.50.

To qualify for Gift Aid you need to:

- be a UK taxpayer

- pay at least the same amount of income tax as the balance of your donations

- make the donation as an individual.

If a higher-rate taxpayer, you can benefit by using charity donations as a way of increasing your basic tax rate. You must include any donations you make on your self-assessment tax return.

If employed, you can donate through a Payroll scheme.

A basic rate taxpayer who donates £10 will pay £8, and the charity receives £10. If a higher-rate taxpayer, the reduction in salary will be £6, with the charity receiving £10. Be aware that agencies that facilitate such schemes, often take a percentage too.

Overall charities prefer Gift Aid donations as they can claim more through how the tax relief calculations work.

Tax Relief as a limited company

Very simply, any donation amount is taken off profit levels before corporation tax is calculated, thus providing a tax break.

There are rules around what you may get in return and how much they can be valued at i.e., tickets.

You can find out more about the tax relief associated with charity donations on the gov.uk website or just give us a call.

Other benefits to consider

Attract talent – offering the opportunity to volunteer during working hours, or be involved in a local charity regularly, is a great way of attracting talent into your business. This could be a quarterly event, combined with team building, or allowing individuals a certain number of days each year to volunteer at a charity of their choice.

Retain Staff – staff are likely to stay in organisations where they have loyalty and commitment not only to their employer but also to a charity. They may be unable to commit time out of working hours but have greater job satisfaction and a feeling of purpose by being involved in charity support at work.

Increase clients – customers can make purchase decisions based on the reputation of the company, and various surveys have shown that consumers “like” companies that are seen as philanthropic. This is particularly popular with younger clients.

Improve public engagement – being associated with a local charity can be a great PR boost. Whether sponsoring an event, physically helping at a charity event, or providing “free” services to the charity, is a great way of becoming involved in the local community.