How can savers and investors make the most of their ISA allowance? Read our special report to find out.
The forthcoming intergenerational transfer of wealth is a topic that has been covered many times. Estimates suggest that 25-to-45-year-olds expect to receive more than £1.2 trillion in inheritances within the next three decades.
The question is what this generation will do with such a huge sum. Of course, the fund management industry will be hoping they decide to invest in equities. While that could happen, some consumer education may be needed to encourage it.
A recent survey from Sanlam UK suggests many (12%) intend to gift some of their windfall to a charity or cause close to their hearts.
For those looking to do this, it’s important for people to understand their options. As Sagar Morjaria, wealth adviser at Canaccord Genuity Wealth Management, points out there are ways to maximise the benefits of giving both to your chosen charities as well as your own personal tax situation.
Gift aid, Morjaria explains, can be invaluable in doing this. Through gift aid, for every £1 a UK taxpayer gives to charity, their charity can claim an extra 25p without any extra cost to the donor.
Tax Breaks
While there are obvious benefits for the charities that are, according to Sanlam, set to secure millions of pounds worth of donations over the next 30 years, there are also perks for donors.
Higher and additional rate taxpayers can claim back the difference between the rate they pay and the basic rate on their donations via self-assessment or by asking HMRC to amend their tax code.
“It's something nice for higher and additional taxpayers to think about doing before the end of the tax year, as it gives them the feelgood factor, in addition to being beneficial from a tax perspective,” says Morjaria.
You can also consider donating shares to charity before the end of the tax year for additional tax benefits.
You won’t be liable for capital gains tax on shares given to charity, while it may be possible to deduct the value of your share donation from your total taxable income, meaning it’s a good way of mitigating your tax bill.
“If gains have been particularly high in a few shares, you could dilute your position and maximise your tax efficiency by donating them to charity,” explains Morjaria.
One final thing to consider is donating directly from your salary or pension through Payroll Giving, if your workplace is able to offer it.
“The issue is that not many higher-rate taxpayers realise they can offset their charitable donations against their tax return and even fewer seek to claim it,” Morjaria adds
