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Giving to charity - Tax reliefs you can use

Simple ways to use the reliefs available on qualifying gifts

Giving to charity is usually driven by personal values rather than tax planning, but the tax treatment still matters. Used properly, the available reliefs can help a donation go further, reduce your tax bill, or both.

HMRC’s latest charity tax relief statistics show that charitable tax reliefs were worth around £6.7 billion in the year to April 2025, including £1.7 billion of Gift Aid paid to charities.

For individuals, the main UK reliefs sit in four areas:

• Gift Aid
• Payroll Giving
• Gifts of shares or property
• Charitable gifts left in a will

Each works differently. Sometimes the charity receives the tax benefit. In other cases, you claim relief yourself. The right approach depends on what you are giving, how often you give, and your wider tax position in the 2026/27 tax year.

Start with Gift Aid

For most people, Gift Aid is the first thing to review.

If you make a qualifying donation under Gift Aid, the charity can claim an extra 25p for every £1 donated, at no additional cost to you.

To use Gift Aid, you need to complete a declaration with the charity. That declaration can cover:

• Current donations
• Future donations
• Donations made in the previous four years

Gift Aid is straightforward, but it is not automatic.

You should only complete a Gift Aid declaration if you have paid enough UK Income Tax or Capital Gains Tax to cover the amount the charity will reclaim. HMRC states that your Gift Aid donations in a tax year must not exceed four times the amount of qualifying tax you have paid.

If a charity reclaims more tax than you have actually paid, HMRC can ask you to pay the difference.



This catches people out more often than many realise, particularly:

• Retirees
• Students
• Lower earners
• People whose dividend or savings income falls within allowances and generates little actual tax liability

Before ticking the Gift Aid box, it is worth checking your position properly.

What does not qualify for Gift Aid?

Gift Aid is not available:

• Where the payment is really for goods or services
• Where the donor receives benefits above permitted limits
• For Payroll Giving donations
• For gifts of shares (which have separate relief rules)

Higher-rate taxpayers may be missing extra relief

One of the most commonly overlooked areas is the additional tax relief available to higher and additional-rate taxpayers.

If you pay tax above the basic rate, you may be able to reclaim the difference between your rate of tax and the basic-rate relief already claimed by the charity.

HMRC says this can be claimed either:

• Through Self Assessment
• Or by asking HMRC to adjust your tax code

For example:

• A £100 donation under Gift Aid becomes £125 gross to the charity
• A 40% taxpayer can then reclaim £25
• A 45% taxpayer can reclaim £31.25

A lot of people tick the Gift Aid box and assume the process ends there. In reality, many higher-rate taxpayers are leaving relief unclaimed.

If you already complete a tax return, it is worth reviewing your donations before filing.

Timing can matter

HMRC also allows Gift Aid donations made in the current tax year to be treated as if they were made in the previous tax year, provided the claim is made through your tax return before the filing deadline.

That can help where:

• You paid higher-rate tax in the previous year but not the current one
• You want relief earlier

Gift Aid and adjusted net income

Gift Aid can also affect adjusted net income calculations.

HMRC’s guidance confirms that Gift Aid donations reduce adjusted net income by the grossed-up amount.

In practice:

• Every £1 donated reduces adjusted net income by £1.25

This matters because adjusted net income is used when calculating:

• The Personal Allowance taper
• The High Income Child Benefit Charge

For the 2026/27 tax year:

• The Personal Allowance remains £12,570
• The taper begins once income exceeds £100,000

The allowance reduces by £1 for every £2 of income above that threshold.

For taxpayers in England, Wales and Northern Ireland, this creates an effective 60% marginal tax rate between £100,000 and £125,140.

A Gift Aid donation can therefore do more than support a charity — it can help restore lost Personal Allowance.

For example:

• An £800 Gift Aid donation becomes £1,000 gross
• Adjusted net income reduces by £1,000, not £800

That reduction may help recover part of the Personal Allowance as well as generating higher-rate Gift Aid relief.

Payroll Giving

If your employer or pension provider offers Payroll Giving, this can be a very efficient option for regular donations.

Under Payroll Giving:

• Donations are taken before Income Tax is deducted
• National Insurance still applies
• Income Tax relief is applied immediately

For most UK taxpayers, donating £1 through Payroll Giving costs:

• 80p for a basic-rate taxpayer
• 60p for a higher-rate taxpayer
• 55p for an additional-rate taxpayer

Scottish taxpayers have different rates because Scottish Income Tax bands differ.

Payroll Giving is often attractive because:

• Relief is immediate
• There is less admin
• Donations do not need separate tax return claims

However, it depends on your employer or pension provider offering a scheme.

Gifts of shares, land and property

Cash donations are not the only option.

In some situations, gifting shares, land or property directly to charity can be significantly more tax-efficient.

If you donate qualifying investments or property:

• You may receive Income Tax relief
• You usually avoid Capital Gains Tax on the disposal

That can be more efficient than selling the asset first and donating cash afterwards.

HMRC’s guidance says Income Tax relief is generally based on:

• The market value of the asset at the time of the gift
• Plus incidental costs such as broker fees or legal fees
• Less any benefit received

Because these rules are more technical, record-keeping is important.

Charitable gifts in your will

Charitable giving can also play a role in estate planning.

A charitable gift left in a will is exempt from Inheritance Tax because it is deducted from the estate before tax is calculated.

There can also be an additional benefit:

• If at least 10% of your net estate is left to charity, the Inheritance Tax rate may reduce from 40% to 36%

For the 2026/27 tax year:

• The nil-rate band remains £325,000
• The residence nil-rate band remains £175,000
• These thresholds are frozen until 5 April 2031

For some estates, the reduced tax rate offsets more of the charitable gift than people expect.

Common mistakes

Some of the most common issues include:

• Assuming Gift Aid is the end of the process
• Using Gift Aid without paying enough qualifying tax
• Ignoring non-cash giving options
• Claiming relief for organisations that do not qualify

Since April 2024, UK charitable tax reliefs generally apply only to qualifying UK charities and UK Community Amateur Sports Clubs (CASCs).

Choosing the right route

The right option depends on what you are giving and what you want to achieve.

• For one-off cash donations, Gift Aid is usually the starting point
• For regular donations from salary or pension income, Payroll Giving may work better
• For investments or property standing at a gain, direct gifting may be more tax-efficient
• For estate planning, charitable legacies can reduce Inheritance Tax exposure

The key point is that charitable tax relief is broader than many people realise.

Gift Aid is only one part of the picture.

Before the end of a tax year, it is worth reviewing your donations, checking whether all Gift Aid claims are valid, and making sure any higher-rate relief has not been missed.

If you are considering larger gifts involving shares, property or estate planning, it is usually worth getting advice before acting.

If you would like tailored advice around charitable giving and tax reliefs, I’m always happy to have a straightforward conversation.