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Give to Charity before tax year end and avoid tax!

Avoid tax and help children like this child, from Tijuana, Mexico
Avoid tax and help children like this child, from Tijuana, Mexico

The UK tax year ends on this Tuesday so now is the last chance for decisions which count in the last tax year.

The end of the tax year is about to sail past virtually unnoticed because (unlike 31 Jan for example) it is not a date when most people are forced to do something, such as file a tax return. It is, however, an important opportunity and one to think about. When you complete your tax return next January, you can give any tax refund due to a charity, but by then it is way too late for that or any other donation to count in the calculation of 2010-11. And the donation counting for a different tax year may make more difference than you think.

This is especially important for people retiring, downshifting or reducing their income to below a tax threshold. If you are a higher rate tax payer this year, but may not be next year then any donation this year can be offset against your highest rate of UK tax when you complete your tax form (assuming you remember to tick the Giftaid box when you give). The same donation next year may not get you any tax offset at all if, for example, you become a basic rate tax payer. 

Even for basic rate tax payers, giving in the next couple of days is better because the Giftaid rate (which the taxman pays to charities) is going to fall from the start of the next tax year. Next year your gift will be topped up by 25% instead of 28% and although this money does not go to you, you wouldn't be interested in giving to charity if you did not care about the charity's economics too.

Whilst we are talking about charity economics, perhaps we should reiterate the advice we have made before on effective giving. The most efficient way to give to a charity is online (online fundraising costs a tiny proportion of using Direct Mail, street fundraisers, TV ads with a switchboard etc.). Giving online also discourages charities from wasting money on all those other things. The most effective way to give is to close your eyes and check you can explain simply what the money is actually being used for, rather than just the "cause" (so for SOS Children that would be something like "my money is spent on giving orphans family based care"). If you are not completely sure what you are giving to (so you can name a "cause" like "child abuse" but not explain how your money is spent), there is a chance there may be a reason the charity has not told you what they do with the money, so try another website. 

If this is last minute and you do not have money in a suitable bank account then using a credit card is possible, since the date of the gift to the charity counts rather than when you repay your credit card balance.

If you can donate to SOS Children before the tax year ends, give now or find out about how to sponsor a child with SOS Children.