Simple moves to ease the charity crunch
Chiara Cavaglieri and Julian Knight on making money go further
Sunday 27 September 2009
Charity begins at home, particularly in a recession. According to figures released by the Charities Aid Foundation (CAF) last week, donations have fallen off a cliff this year, 11 per cent down.
"Many charities are caught in a pincer: They are seeing less money come in but at the same time a much greater demand for their services," said James Ketchall, a CAF spokesman. "Those charities involved at the sharp end of the recession – employment, mental health and debt advice – are the most hard pressed at this time." But a few simple steps by donors – without throwing in a penny more – could spell the difference between life and death for some charities. There are several ways to maximise donations or to see that charities enjoy a cash boost for no outlay in these difficult times.
Make use of Gift Aid
If you donate directly to your charity, by far the most important thing to do is select the Gift Aid option.
Despite being one of the simplest ways to maximise your donation, an estimated £750m worth of Gift Aid goes unclaimed every year. It works by allowing charities to reclaim the basic rate of tax on any money they receive from taxpayers. So a donation of £10 using Gift Aid is actually worth £12.50 to your chosen charity. Additionally, the Government has stepped in to allow further relief of 3.2p per pound until 2011, so simply by selecting the Gift Aid box will mean that charities will receive an extra 28.2p per pound donated. Higher-rate taxpayers can claim higher-rate relief on their payments on their self-assessment tax returns. Gift Aid can be used on your physical donations too. At British Heart Foundation stores, for example, donors are notified when their gift has been sold and given the option to select Gift Aid and allow the charity permission to reclaim the tax.
Sign up for give as you earn
Payroll schemes, such as Give As You Earn, are a simple way to donate with little effort involved on your part. These enable you to donate to a UK charity straight from your gross salary, before any tax is deducted. So, for every £10 donated, a basic taxpayer would only have to donate £8 and a higher rate taxpayer, just £6. You can't do this on your own so check that your employer is running a scheme and try to encourage one if there isn't.
"Give As You Earn is a straightforward way of donating, and that's why we would urge everyone to consider using it to support their favourite charities," says John Rolls, the RSPCA's director of animal welfare promotion.
Leave money in your will
Another tax-efficient way to give to charity is to provide charitable donations in your will, which will be free of inheritance tax. Money isn't the only thing you can leave; jewellery, works of art, cars or houses are also exempt when you leave them to a charity.
"The great thing about it is that it allows charities to make long-term financial plans," says John Low, the chief executive of the CAF.
Donating your shares is a less obvious way to help your charity, but it does have several tax benefits. When you sign them over to the charity, you are exempt from capital gains tax and you can offset their value against income tax. Charities can decide whether or not to sell the shares. This can be particularly useful if you've reached your capital gains tax limit, or have a shareholding that's not big enough to be worth selling.
"Charities receive only about £100m a year in gifts in shares but there are about 12 million people in the UK who are shareholders. Donors can claim income tax relief on the market value of the shares gifted," adds Mr Low.
Charity savings accounts
These work by paying a percentage, usually of the average balance per annum, to the affiliated charity. In recent times, rates have fallen with the bank rate, with most paying under 1 per cent AER. The good news, however, is that donations have not been affected and still stand at about 1 per cent, more than the rate offered to the saver in most instances. Spinal Injuries Scotland from Scottish Widows Bank is the only charity account to pay 2 per cent on balances of £5,000 but it pays only 0.20 per cent to the charity quarterly.
All of the charity savers are either instant-access or notice accounts, which require a warning period before any withdrawals are made. Right now, First Save offers a rate of 3.25 per cent AER on its 90-day notice account for deposits of £100 or more. It may be more prudent to opt for an account paying higher interest and donate the additional interest yourself.
"These accounts will appeal to those who want to support their favourite charity, without having to make any further effort. Interest is forgone by the saver in support of the charity. Similar to ethical investments, it is more of lifestyle choice," says Michelle Slade from financial information service Moneyfacts.
Charity credit cards give you the chance to donate cash to your charity with your day-to-day spending. These cards typically donate a fixed amount upon first usage to a specific charity and then a percentage of your spending each time it's used thereafter.
Be warned: these are not for everybody. If you struggle to clear your balance each month, steer well clear because these cards are rarely competitive. However, if you are able to pay off your credit card bill easily each month, these cards can be a great way to give to charity, with no effort or extra spending on your part.
Among the more generous charity credit cards are the Halifax NSPCC and Cancer Research cards, both of which will donate £20 the first time you use it and 0.25 per cent of your purchases from then on. Both cards offer 0 per cent on purchases and balance transfers for the first nine months. After this period, a typical rate of 16.9 per cent APR applies.
Earning while you shop online is one of the most popular internet trends of late and many now give you the option to donate your earnings to charity. Shoppers who purchase items through GiveorTake.com, for example, can earn up to £90 on mobile phone purchases and up to £70 on car insurance. The money accrued through these purchases can then be donated to one of a number of charity partners, including Barnado's, Christian Aid and Shelter.
Registration is free if you give to charity and £5 a year otherwise. There are more than 700 online stores to shop at on the site, with big brand names such as HMV, Marks & Spencer and even eBay. The process is straightforward; simply select the "give" option in your online account and pick your charity.
Always give directly
The sight of a clipboard-carrying street fundraiser, or "chugger", as they have come to be nicknamed, is rarely a welcome one and never more so during a recession. If you're put off by the idea of setting up a direct debit for your donations, cut out the middleman and give to your charity yourself. Many charity websites offer the option of online payments. Many "chuggers" are employed by a third-party firm which charges commission for getting people to sign up. The rationale for the charity is that it pays in the long term. However, if you give directly there is no middleman's cut.
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