Are Charity Donations Tax Deductible?

Charitable giving not only supports causes you care about, but it can also bring tax benefits. In the UK, donations to registered charities are tax deductible in specific ways, depending on whether you're an individual or a company.

This guide explains how Gift Aid, payroll giving, and corporation tax relief work, and what you need to keep as evidence when claiming tax relief.

Are Charitable Donations Tax Deductible?

Yes – but not in the same way as in some other countries like the US. In the UK, you don’t deduct donations directly from your taxable income. Instead, tax relief is offered through Gift Aid or corporation tax deductions, depending on who is giving and how.

There are different rules for:

• Individuals (employees, self-employed, higher rate taxpayers)

• Companies making donations

• Gifts made through wills or legacies

What Is the Tax Relief for Individuals That Donate to Charity?

If you’re a UK taxpayer and you donate to a registered charity, you can usually claim tax relief through Gift Aid.

Here’s how it works:

• You give £80 to charity

• The charity claims back £20 from HMRC (making your donation worth £100)

• If you pay 20% basic rate tax, no further action is needed

• If you pay 40% or 45% tax, you can reclaim the difference on your Self Assessment

So a higher-rate taxpayer donating £80 can reclaim £20 (at 40%) or £25 (at 45%) on their tax return.

You must:

• Be a UK taxpayer

• Fill out a Gift Aid declaration

• Ensure you’ve paid enough tax to cover the Gift Aid reclaimed

Can I Donate to Charity Straight from My Wages?

Yes, through Payroll Giving, also known as Give As You Earn. This allows you to donate directly from your gross salary before tax is deducted, giving you automatic tax relief at source.

For example, a £10 donation:

• Costs £8 for a basic rate taxpayer

• Costs £6 for a higher rate taxpayer

Your employer must be registered with an approved Payroll Giving agency to offer this scheme. Unlike Gift Aid, the charity doesn't claim anything back – the tax saving goes straight to you.

What About Companies That Donate to Charity?

Limited companies can claim corporation tax relief on qualifying donations to UK registered charities. Donations must be made from pre-tax profits and can include:

• Money

• Equipment or stock

• Sponsorship

• Secondment of staff

• Land, property or shares

The donation reduces the company’s taxable profit, so the business pays less corporation tax. You must report the donation in your company accounts and tax return.

Companies cannot reclaim VAT on charitable donations unless it's for a business purpose (e.g. sponsorship, not a pure gift).

Leaving Gifts to Charity in My Will

Charitable gifts made in your will are exempt from Inheritance Tax (IHT). If you leave at least 10% of your estate to charity, your IHT rate on the rest of the estate may also be reduced from 40% to 36%.

To qualify:          

• The charity must be registered and recognised by HMRC

• The gift must be clearly specified in your will

This can significantly reduce the tax burden on your estate and ensure your legacy supports a good cause.

What Records Should I Keep?

To claim tax relief, keep the following:

• Gift Aid declarations (paper or online)

• Payroll Giving confirmation from your employer

• Receipts, bank statements or confirmation emails for donations

• For Self Assessment: copies of your tax return showing claims

• For companies: records of donations in accounting systems and corporation tax return (CT600)

HMRC may request evidence, especially for larger donations or during an audit.

Final Thoughts

Charity donations in the UK can offer generous tax relief, but you must use the right method. Gift Aid is the most common route for individuals, while companies benefit through corporation tax deductions. Payroll giving is another simple way to reduce tax at source.

Always check that the charity is UK-registered, keep good records, and consider speaking to a tax adviser for large or complex donations, including those made in wills. Giving back not only supports important causes – it can also benefit your bottom line.