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Giving shares to charity

Practical Issues
EthicsGradient
Lemon Slice
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Re: Giving shares to charity

#405720

Postby EthicsGradient » April 20th, 2021, 11:42 pm

This is not Gift Aid. This is donating shares to a charity. The HMRC page for that:

Donating land, property or shares
You do not have to pay tax on land, property or shares you donate to charity. This includes selling them for less than their market value.

You get tax relief on both:

Income Tax
Capital Gains Tax
...
Income Tax relief
You can pay less Income Tax by deducting the value of your donation from your total taxable income. Do this for the tax year (6 April to 5 April) in which you made the gift or sale to charity.

How to claim
If you complete a Self Assessment tax return, add the amount you’re claiming in the ‘Charitable giving’ section of the form. This will reduce your Self Assessment bill.

https://www.gov.uk/donating-to-charity/ ... -or-shares

I think the question is just whether "Income Tax relief" means relief on 'pure' income tax, or relief on all the tax you pay in a self-assessment income tax return. But, thinking about it, the Gift Aid wording "they must pay enough Income Tax and / or Capital Gains Tax to cover the tax" which they use repeatedly looks promising - if Capital Gains Tax can be counted for the purposes of "did they pay enough tax for the Gift Aid reclaiming process?", then you'd hope they use the same calculation for share donations.

EthicsGradient
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Re: Giving shares to charity

#444132

Postby EthicsGradient » September 21st, 2021, 1:06 pm

An update: I've now had my tax calculation for the past year, and it shows how a gift of shares to a charity is handled. They add the amount of the gift to your personal allowance, to give a lower amount of your income that is subject to tax.

This has the effect of the tax being claimed back at the highest rate you pay. In my case for the past year, that was only the 7.5% dividend rate; so, even with the effective cancelling of 10% CGT on the donated shares that were about 90% capital gain, I've only been able to effectively claim back 7.5%+9%=16.5% of their value, when donating the cash as Gift Aid would have been 20%. A lesson for me. However, people who pay 20% income tax on earnings etc. could still do better with donating high capital gain shares, rather than selling them, paying CGT on them, and then giving the cash as Gift Aid.

That also means that for me in the current year, it's not worth donating shares with high capital gain and then claiming the amount in my return against capital gains paid against other shares. At best, this would calculated as decreasing the amount of gain subject to tax, ie an effective relief of 10% on that value, plus 9% of the value of the donated shares - still less than 20% via Gift Aid cash. But most of it would be used to decrease my 7.5% dividend income tax liability to zero, and after that, it's not clear that any left would be used to decrease the amount subject to capital gains (the tax calc is done as: work out total income, subtract personal allowance and donation value, work out tax on the rest, work out NI on earned income, work out CGT due; probably not, since I think if someone had total income below the £12,570 personal allowance, but capital gains above the £12,300 CG allowance, I don't think they could transfer unused personal allowance to the CG calculation).


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