In the midst of the plethora of challenges facing us all, those who are fortunate to have something to spare may be seeking ways to support causes close to their hearts this Christmas, the peak time for charitable giving. But with so many worthy causes, how do you go about gifting in the most effective way?
Philanthropy is a longer-term, more strategic approach to giving, aimed at addressing the underlying causes of problems facing our communities and wider society. It focuses on effective giving and maximising the impact of donations to ensure they are making a real difference for the organisations, as well as fulfilling the wishes of those giving the gifts.
Here, Andrew Evans, Philanthropy Adviser at Equilibrium Financial Planning shares his top tips for getting started with philanthropy and gifting well.
1. Identify the causes that matter most to you
With more than 170,000 registered charities in the UK and Wales alone, it’s not possible to support every cause. These charities do amazing work, which means that giving begins with identifying the causes that matter most to you and the organisations in which you feel your money is likely to have the greatest impact.
If you’re unsure of how to narrow down your areas of interest, think about what you want to achieve through giving and identify your objectives. You could also consider working with a philanthropy adviser who will help you to identify charities that align with your passions, interests and goals.
2. Do your research
Once you have compiled a list of organisations or causes that you’d like to support, take some time to do your research. This should include elements such as ensuring the organisation has a Charity Registration number. If it does you can visit the Charity Commission’s website to find out information such as who the charity’s trustees are, how muchsenior staff are paid and their published accounts.
It’s also worthwhile considering the size of the charity you want to donate to. Whilst gifting to large charities will make a difference, it’s important not to overlook smaller or newer charities that may be championing just as worthy causes. Your donation could make a much larger impact in a smaller charity with less scope for advertising budgets and fewer donors.
Similarly, you could research organisations nearby that are helping causes in your local area, enabling you to stay in regular contact and even see first-hand the difference that your money is making.
3. Consider a Donor Advised Fund
A Donor Advised Fund (DAF) is a charity that distributes funds in accordance with the wishes of those who make donations. It is simpler than setting up your own charitable foundation and allows you to plan donations over a prolonged period.
The money does not have to be donated straight away and can be invested by the DAF for capital growth or income, but it does attract relevant tax relief immediately. When you are ready to make a charitable gift from the fund, you ask the trustees of the DAF to make the donation. It is important to note that you cannot get the money back once it is placed into a DAF.
4. Know your tax benefits
Whilst the main goal of giving is to make a positive difference, it’s important to be aware of the benefits that gifting can provide to you as well. Charitable giving and philanthropy facilitate a range of tax benefits, including those related to inheritance tax.
Given the continued freeze of allowances, this is a consideration that is becoming relevant to an increasing number of households in the UK. This is because when you give money to charity your taxable income is reduced by the amount you chose to gift. For those earning between £50,000 – £60,000 or over £100,000, a charitable donation may mean your income falls below the tax threshold, meaning that valuable benefits can be retained or reinstated.
5. Go for Gift Aid
Gift Aid also has benefits for your tax bill, as well as for your chosen cause. For every £1 that you give, charities can claim 25p back from the government. If you are a higher-rate or additional-rate taxpayer, you can also claim back 20% or 25% of the donation respectively via a tax return.
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