Charitable Gifts - How to schedule gifts to charity and the receipt of gift aid

Tax deductible charitable gifts are usually entered on the Expenses > Legacy screen with Recipient set to Charity.

Donations to charity can be used to offset against income tax. For higher rate taxpayers, charitable gifts result in tax relief similar to what is received on personal pension contributions.

If the giver is a higher rate taxpayer he/she gets a tax credit in the amount of 20% (the higher rate minus the basic rate) of the gift. Also, the charity gets to claim the basic rate back from the HRMC. So.... the gross gift that the giver gets credit for is grossed up by the amount that the charity gets from the HMRC.

For example, for a gift of 17,500, the grossed up gift is ( 17,500 / (1 - 20%)) = 21,875. The tax credit is then 21,785 x 20% = 4,375 which is shown as a credit in the taxes summary.


Leaving all or part of one's estate to charity

The software will reduce the IHT rate from 40% to 36% if a client leaves 10% or more of their estate to charity. Estate distributions are set on the Estate Plans screen.