Gift Aid – the end of transitional relief

When you make a Gift Aid gift into your Stewardship account, we are entitled to claim ‘Transitional Relief’ from the Government. This adds a further 3.2% to the value of the amount given and is added to your account balance. Transitional Relief compensates charities for the reduction in the basic rate of tax from 22% to 20% on 6 April 2008. It does not affect the amount of personal relief that higher and additional rate taxpayers can claim so it really is a bonus whoever the giver is … but only whilst it lasts!

HM Treasury has confirmed, as expected, that the relief will not be extended beyond its original  three year term and so it ends in the next couple of months - on 5th April 2011.  Gifts made into your account after this date will not be entitled to Transitional Relief.

so what actions should you be thinking about now?

• Consider whether regular gifts that you had planned to make after 5^th April can be advanced to before 5^th April.

• If you have plans to make any one-off gifts, consider if these can be made before, rather than after 5th April.

giving for higher rate taxpayers

For some years now, higher rate taxpayers have been able to claim personal tax relief equal to the difference between the higher rate tax that they pay on the top part of their income and the basic rate claimed by the charity. Transitional Relief does not affect this calculation. To illustrate:

•  If you are a higher rate taxpayer, have you considered giving the additional personal tax relief (final line above) as an additional gift into your account?  If you do this, we can claim Gift Aid on it, and if you do this before 5^th April, we will be able to add Transitional Relief as well!

Persons earning over £112,950 are no longer entitled to a personal allowance. If your taxable earnings are in the bracket between £100,000 and £112,950, part or all of your personal allowance against tax will be withdrawn. This means that you are effectively paying tax at 60% on that part of your income between these two limits.

• The gross value of gifts into your Stewardship account reduces the amount of your ‘income’ for these purposes. Therefore if the total value of gifts that you have made to charity (including to Stewardship) in the tax year bring your income below £112,950 relief will be gained at 60% for that part taken out of the above bracket.

giving for additional rate taxpayers

If you are earning over £150,000, so that you are paying the additional rate (50%) of income tax, the relief position is even better:

•  If you are an additional rate taxpayer, have you considered giving the additional personal tax relief (final line above) as an additional gift into your account? If you do this, we can claim Gift Aid on it, and if you do this before 5^th April, we will be able to add Transitional Relief as well!

•  If your taxable income, after other tax planning and reliefs, such as pension contributions, falls just above £150,000, making a special one-off Gift Aid gift for this purpose could reduce your income below £150,000, bringing you out of the additional rate altogether. Aside from the tax relief that the gift brings, this may have other personal benefits, such as reducing the tax rate on any dividend income that you enjoy from 42.5% to 32.5%.

the Stewardship Gold account – ideal for larger gifts

Stewardship’s Gold account is the ideal way to organise charitable giving for those who have large amounts to give.  Starting with a balance of £10,000 or more, tax-effective gifts can be made into the Gold account at any point. And with no requirement for you to ask us to distribute funds immediately, this can be particularly useful for personal tax planning - for end of year bonuses or on an inheritance, for example – secure the tax relief now, choose recipient causes later.

You can request us to transfer part of your balance to our Pooled Investment Fund. The remaining balance will grow with a monthly credit equivalent to interest. So, funds can increase whilst you think about how you wish to distribute them.  You can also set up a Direct Debit from your bank account to organise your regular giving.

For more information on how to keep all your charitable giving, efficiently, under one roof, go to www.stewardship.org.uk/gold