At last, charity begins at the building society

MONEY TALK

Not before time one of the converting societies, Bristol & West, is to ask members due to receive a cash handout this month whether they want to give a cut of it to charity. If they tick the box on a mailing due to go out shortly, the donation will be deducted by B&W and used to support a project in the customer's locality. If every customer gives just 1 per cent of their windfall, a total of pounds 6m will be raised.

It's a nice idea and a shame it has taken until handout number six this year for such an option to be put to windfall recipients. Previously, the guilt-ridden and the generous have had to do the legwork to find a charity themselves. Halifax claims it would have made its forms too complicated, although arguably adding this option could hardly have made the forms more complicated than they already were.

Bristol & West's worthy effort has a flaw, however: it offers no specific tax benefits. In particular, most people tempted to give pounds 250 or more of cash would do better with the Government's Gift Aid scheme. This boosts the value of donations to the charity, assuming you're a taxpayer, and can also cut the cost to you.

Gift Aid allows the charity to reclaim the basic-rate tax (23 per cent) you are deemed to have already paid on the money. And if you are a higher- rate taxpayer, you can also get a rebate for the 17 per cent extra tax also deemed to have been paid. The fact you haven't actually paid tax on the windfall money is neither here nor there - so long as you have sufficient taxed income elsewhere.

As well as cash, some charities are happy to accept gifts of shares, in which case the deal is that the windfall shares do not use up any of your annual capital gains tax allowance and are also free of inheritance tax.

If instead you want to make a smaller cash gift, but are prepared to continue this for at least three years, you can also get similar tax perks as under the Gift Aid scheme by setting up a covenant for your chosen charity. However, the society's scheme remains the best option for small one-off donations.

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