The Business Benefits of Donating to Charity

There’s no doubt of the value of charities in society. Many of us have benefitted from them in some way or another. Plenty of people try to do their bit to help and donate as individuals but what about donating to charity through your business?

We were recently proud to accept an award from a local charity called Fountains of Knowledge. They awarded us a ‘Community Service Award’ for helping them out and providing free advice. This has got us all thinking about the multiple benefits of giving to charity, as well as the financial and tax advantages as well.

If you are weighing up giving back to charities as a business, keep reading to learn about the benefits of giving to charity.

This article contains:

  • Why should you give to charities as a business?
  • Financial benefits of giving to charity
  • Gift aid for individuals
  • Reduced rate of Inheritance Tax
  • Corporation Tax relief
  • Capital Gains Tax relief
  • Other benefits of giving to charity

Why should you consider donating to charity as a business?

Every financial decision from a business perspective needs to be carefully considered. Will it benefit the business? Will it be a sustainable investment?

When it comes to charities, some businesses are hesitant. However, there are actually financial benefits of doing so – as well as the overall moral benefits. This makes giving to charities a win-win situation for both the charity and the business.

Financial benefits of giving to charity

Gift aid

Giving to charity provides you with some income tax relief. This goes for all taxpayers, no matter what rate you pay. Furthermore, if the charity you support claims gift aid, the amount you donate increases by 25% to further support the cause. This means charities will claim back the income tax paid by donors on their donations.

There’s also something called Corporate Gift Aid. This works slightly differently. Rather than the charity claiming back the income tax, the company donating gets to claim tax relief instead.

If you decide to donate via the Payroll Giving route, the amount you donate from a salary won’t be taxed at all. This is something you could set up for your own directors’ payroll or even offer to your employees.

Reduced rate of Inheritance Tax

If you specify in your will that 10% or more of your estate will be left to charity, the Inheritance Tax rate on the estate will reduce. The standard rate of Inheritance Tax is 40% of the estate. This reduction means that the rate will reduce to 36% instead.

Corporation Tax relief

As Corporation Tax is based on profit, if your business donates to a charity, that amount won’t count as profit. This means you won’t have to pay tax on the amount you donate. To do this, you will need to deduct the value of your donation from your total profits when you do your company tax return.

Capital Gains Tax relief

If you ever decide to donate land or properties to a charity, you won’t need to pay Capital Gains Tax on these donations.

Other benefits of donating to charity

Giving back to charity isn’t just about donating money, community involvement has multiple benefits as well.

Not only does it help the charities themselves and provide networking opportunities for you, but it can also give a morale boost to employees and improve customer opinion of you. A study from Foresters in 2013 found that 82% of consumers were more likely to shop with companies that support charities.

Giving to charity offers more than just satisfaction that you are doing the right thing. If you’re worried about the financial implications of doing so, it can definitely benefit your company financially as well.

If you do want to give to charity either as an individual and/or through your limited company, it’s best to seek advice from your accountant. An accountant can ensure all your charitable donations are recorded correctly so you can claim the relevant tax relief.

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