Gift Aid | The Ulysses Trust

GIVING MADE EASY

The Ulysses Trust affords supporters the opportunity to spread their gifts over a period of up to five years. This together with tax effective giving, means support is both easy and affordable. UK legislation provides several incentives to encourage people to share their resources for the benefit of causes for the public good. There are several ways in which donors can express their support in ways which are tax efficient.

Gift Aid for a basic rate taxpayer

If you are a UK taxpayer and make a gift-aided donation to the Ulysses Trust, the Trust is entitled to reclaim from the Inland Revenue the tax, calculated at basic rate of income tax, that the Inland Revenue has either received from you (if tax was deducted at source from your income) or will demand from you (once you have complete your tax return, if tax was not deducted at source). Consider £1,250-worth of income on which you have already paid, or will pay, income at the basic rate of income tax, currently 20%. You have paid, or will pay, £250 in income tax and have £1,000 remaining as after tax income. If you gift-aid the £1,000 to the Ulysses Trust, the Trust can reclaim the £250 from HMRC, which is 20% of £125 pre-tax income required to make the donation. To the Trust, this £250 is worth 25% of the £1,000 after-tax gift. Because of the Trust’s ability to claim from the Inland Revenue in this way, donors are able to calculate and choose either the net amount they wish to donate (of which the Trust can claim 25% from the Inland Revenue) or the gross amount (i.e., the total amount that the Trust will benefit from, after the claim). In either event, it is the net amount which is actually paid out by the individual by way of a donation. The following two examples illustrate this point. .

Example 1: net pledge (i.e., the amount actually gift-aided by the donor)

If, as UK taxpayer, you make a pledge of £5,000 (£1,000 per year for five years), the Ulysses Trust is entitled to reclaim a total of £1,250 from Inland Revenue, providing the donation is not more than 4 times what you have paid in tax in that tax year (6 April to 5 April) thus making your gift actually worth £6,250 and enabling even more funding for the Trust.

Example 2: gross pledge (i.e., the amount by which the Trust will benefit)

If your wish is to make a gross pledge (what the charity will receive after gift aid) of £5,000, you could make net pledge payments totalling £4,000. With the Inland Revenue rebate, your payment will have a charitable value to the charity of £5,000.

Note: The position of a taxpayer making Gift Aid donations can change from one tax year to the next. Donors are required by HMRC to have paid sufficient income and/or capital gains tax on their donations. Donors must inform the Ulysses Trust if these personal positions change.

ADVANTAGES FOR HIGHER RATE / ADDITIONAL RATE TAXPAYERS

If you are a “higher rate” or “additional rate” UK taxpayer and you make a gift to the Trust, the Trust can claim back the basic rate of tax as described above. Additionally, you can claim back the difference between your highest marginal rate of tax and the basic rate of tax, on the gross amount of the donation. This amount would otherwise be retained by HMRC as the Trust is only able to claim gift aid at the basic rate of income tax. Said another way, the full amount of tax at the highest marginal rate that has already been paid, or would be paid, to HMRC is reclaimable. The Trust can reclaim tax at the basic rate of income tax and the tax payer can reclaim the difference between the basic rate and their 40% marginal rate if they are a higher rate taxpayer, or 45% marginal rate if they are an additional rate taxpayer.

Further advice and HMRC guidelines on how this can be achieved are available from the Campaign office upon request and at https://www.gov.uk/donating-to-charity/gift-aid

COMPANY GIVING

If you wish to make a gift through your company, you should enter the amount of the gift on your company tax return. You will then be entitled to tax relief on the amount of your gift at the rate of corporation tax your company pays.

Gifts of shares and other appreciated capital assets (such as land or property)

If you make a gift of shares instead of cash to the Trust, you will be entitled to Income Tax Relief, as you will be able to deduct the market value of the gift from your total taxable income for the year. In addition, you would not have to pay the capital gains tax you may have incurred had you sold the shares. This type of giving should be clarified with a financial advisor.

Example:

You acquired 10,000 shares at £1 per share and they are now worth £5 per share. Your original investment of £10,000 now has a value of £50,000. If you were to sell the shares, you may incur capital gains tax of between £8,820 and £13,722 (18% -28% CGT of the gain in value of £49,000). This assumes that you have already used up your annual CGT exempt amount. If you were a higher rate taxpayer and were to give the shares to the Trust, you would be entitled to offset this gift against your total taxable income, potentially claiming Income Tax relief of £20,000, as well as avoiding any potential CGT.

Note: These guidelines are illustrative only. Supporters should check with their own financial advisers to see how the tax effective giving opportunities might apply to their personal circumstances.

Leaving gifts to the Ulysses Trust in your will

Your will says what will happen to your money, property and possessions after you die.

Your donation will either:

be taken off the value of your estate before Inheritance Tax is calculated
reduce your Inheritance Tax rate, if 10% or more of your estate is left to charity

You can donate:

a fixed amount
an item
what’s left after other gifts have been given out

How does it work?

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.

There’s normally no Inheritance Tax to pay if either:

the value of your estate is below the £325,000 threshold
you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club

If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren your threshold can increase to £500,000.

If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die. This means their threshold can be as much as £1 million.

Inheritance Tax rates

The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold.

Example:

Your estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000).

The estate can pay Inheritance Tax at a reduced rate of 36% on some assets if you leave 10% or more of the net value of your estate to charity in your will.

Reliefs and exemptions

Some gifts you give while you’re alive may be taxed after your death. Depending on when you gave the gift ‘taper relief’ might mean the Inheritance Tax charged on the gift is less than 40%.

Other reliefs, such as Business Relief, allow some assets to be passed on free of Inheritance Tax or with a reduced bill.