The UK Autumn Budget 2024 was relatively quiet in terms of measures which directly impact the exemptions and reliefs which apply to most charitable donations. For those listening to the Chancellor’s speech, it was interesting to hear certain charities named whose work had positively drawn the attention of the UK Government in shaping policy and spending decisions, including the Trussell Trust, Joseph Rowntree Foundation and The Holocaust Educational Trust.
The Budget papers offered a reminder of the Government’s view that tax reliefs are a “vital element” in supporting charitable causes across the UK, with more than £6 billion in charitable reliefs provided to charities, their donors, and community amateur sports clubs in 2023/24.1 Gift Aid alone was £1.6 billion of that figure, with business rates relief at nearly £2.4 billion. Charitable business rates relief applies where a premises is mainly used for charitable purposes. As expected, the Budget confirmed charitable business rates relief for private schools in England is set to be withdrawn in April 2025 (this change has already been implemented for private schools in Scotland). The Budget also confirmed that, from 1 January 2025, 20% VAT will apply to private school fees across the UK.
A future point of detail to watch on certain charitable donations relates to the scenario where a donor makes a large donation to a charity they control, on which both the donor and the charity claim tax relief, and then the charity invests the donation in a company controlled by the donor (giving a significant financial benefit to the donor). Between now and 6 April 2026, more detailed guidance is expected from HM Revenue and Customs on the tax treatment in this scenario, prior to changes being introduced. For donors with private company shares for example, who are contemplating gifting these to a charity whose board comprises the donor and their family members as trustees, and where the shares will continue to be held in that company, it will be wise to take tax advice to understand if charitable tax reliefs will continue to apply to future such donations of shares. The potential for significant private donor benefit has been called out here, and it’s noteworthy that the consultation leading to today’s announcement was one which began under the previous Government.
An indirect impact on potential donor behaviour could come from the increase in capital gains tax rates, which have gone up to 18% and 24% for basic and higher rate taxpayers respectively, with effect from the date of the Budget. For potential donors who have accumulated an investment portfolio with significant historic capital gains over a period of many decades, some might decide to make a charitable gift of those investments, which secures a number of income tax, capital gains tax and inheritance tax benefits as explained in my article here. In this way, the higher capital gains tax rate may encourage charitable gifting.
In a similar vein, the prospect of unspent pension pots being subject to inheritance tax might prompt some generously-minded individuals to name charities in their pension death benefit nomination form, creating future IHT-free legacies.
The content of this article is for general informational purposes only and does not constitute tax or legal advice. We recommend consulting with a qualified tax or legal professional or advisor to obtain advice tailored to your specific situation. The information provided in this article does not constitute tax or legal advice and should not be used as the basis for any financial decisions.
The tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
This communication is provided for information purposes only. The information presented herein provides a general update on market conditions and is not intended and should not be construed as an offer, invitation, solicitation or recommendation to buy or sell any specific investment or participate in any investment (or other) strategy. The subject of the communication is not a regulated investment. Past performance is not an indication of future performance and the value of investments and the income derived from them may fluctuate and you may not receive back the amount you originally invest. Although this document has been prepared on the basis of information we believe to be reliable, LGT Wealth Management UK LLP gives no representation or warranty in relation to the accuracy or completeness of the information presented herein. The information presented herein does not provide sufficient information on which to make an informed investment decision. No liability is accepted whatsoever by LGT Wealth Management UK LLP, employees and associated companies for any direct or consequential loss arising from this document.
LGT Wealth Management UK LLP is authorised and regulated by the Financial Conduct Authority in the United Kingdom.
