Incorporating charitable giving into your tax planning strategy can be a useful way to reduce both your income tax and the inheritance tax (IHT) that will eventually become payable on your estate.

As such, gifts may become an important component of both the estate planning process and the more immediate goals of reducing your income tax bill.

You can make charitable gifts at any time during your lifetime and posthumous gifts can be written into your will.

There are tax incentives for higher and additional rate taxpayers to make charitable donations through gift aid - a government scheme that allows charities to claim an additional 25% of any donation you make.

Higher and additional rate taxpayers can then claim the difference between the rate they pay and the 20% basic rate of tax on the amount donated.

Donations will not qualify for gift aid if they’re more than four times what you have paid in income tax and/or capital gains tax (CGT) in the previous tax year.

No tax is payable on assets, such as shares, property and land, that you gift to charity or sell to a charity at below market value.

Donations of such non-cash assets are therefore usually exempt of both income tax and CGT.

You can claim income tax relief on such donations by deducting the value from your total taxable income when completing your self-assessment tax return.

It is possible to reduce the amount of IHT charged on your estate by making strategic gifts and charitable donations.

This can be done by making gifts during your lifetime and writing donations into your will.

Gifts to charities and political parties are exempt from IHT.

The annual exemption allows you to make up to £3,000 in IHT-free gifts every financial year.

Potentially exempt transfers (PETs) are gifts made during your lifetime that may be exempt from IHT depending on how long you live for after the transfer is made.

Any charitable donations written into your will are not considered part of your estate for IHT purposes.

Contact Alastair Byrne to discuss your tax planning strategy on 01904 717260 or email him at