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Take advantage of the tax system to claim tax relief while helping your favourite charity
Many BC members should now be aware of the changes in Gift Aid announced in a recent budget. These included the removal of the £250 threshold for donations on which a charity can claim back the tax paid by the donor. However, few people know about another tax efficient way of giving to charities - Gifts of Shares can help conserve butterflies and moths.
Since April 2000 it has been possible for individuals and companies to claim tax relief against gifts of most shares, securities and some other assets if given to charities. In recent years many people have received 'windfall' shares from building societies and utility companies.
Please consider donating some of your shares to Butterfly Conservation and reduce your tax liability as you help to save our threatened butterflies and moths!
Claiming back tax relief
Under Gift Aid donors can now claim relief against income tax AND capital gains tax on gifts of shares to a charity. Relief can be claimed at the donor's highest rate of tax. Claims can be made on your Self Assessment return, or by writing to the tax office, informing them of the value of the gift. This relief is in addition to any relief for gifts to charity of shares, securities and other assets when calculating capital gains.
For instance, a higher rate taxpayer with an income of £40,000 per annum could substantially reduce his or her income tax liability by donating shares worth £5,000 (see Example A below). In this example the donor's income tax liability is reduced by £2,000 (£5,000 @ 40%).
| Example A : Income Tax liability | |||
|---|---|---|---|
| Before making a gift of shares | With gift of shares | ||
| Total earned income | £40,000 | £40,000 | |
| Gift of shares | Nil | -£5,000 | |
| Personal tax allowance | -£4,335 | -£4,335 | |
| Taxable income | £35,665 | £30,665 | |
| Income tax @ 10% on £1,500 | £15 | Income tax @ 10% on £1,500 | £150 |
| Income tax @ 22% on £26,500 | £5,830 | Income tax @ 10% on £5,830 | £5,830 |
| Income tax @ 40% on £7,665 | £3,066 | Income tax @ 10% on £1,066 | £1,066 |
| Total Tax liability on £30,665 | £9,046 | £7,046 |
But if that donor also has a Capital Gains Tax (CGT) liability of £20,000 he or she could save a further £1,000 if the shares to be gifted carried a gain of, say, £2,500. (See Example B below)
In other words, the donor's CGT tax liability is reduced by £1,000 (£2,5000 @ 40%) on top of the relief against his or her income tax.
In Example B the actual cost to the donor of a gift of shares worth £5,000 is £2,000.
| Example B : Capital Gains Tax liability | |||
|---|---|---|---|
| Before making a gift of shares | With gift of shares | ||
| Capital gains tax liability | £20,000 | Less anticipated gain of £2,500 on shares being gifted | £17,500 |
| Capital gains allowance | -£7,100 | -£7,100 | |
| Taxable gains | £12,900 | £10,400 | |
| CGT @ 40% on £12,900taxable gains | £5,160 | £4,160 |
The next step
To find out more about donating a gift of shares or securities to Butterfly Conservation, an information leaflet entitled "Giving Shares and Securities to Charity" (Ref IR178) is available from the Inland Revenue. (telephone: 0151 472 6043/6046).
Alternatively, contact Butterfly Conservation
Telephone: 01929 400209
Email: info@butterfly-conservation.org