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Can I make a charitable donation through my limited company?

Yes you can, and it can benefit your company as well as your karma. 

If you make a donation to a charity through your company, you can reduce the amount of Corporation Tax you have to pay by claiming the donation as an expense. This works by deducting the value of the donation from the business’s total profits before tax (AKA the Gross profit).  
Example: Allison runs a successful design company and decides she wants to donate 2% of her annual profit to charity. The business rakes in £100,000 in the year which means the donation will amount to £2,000. That £2,000 will be an allowable expense that is deducted from her original £100,000. Meaning the new profit total will be £98,000. Allison’s corporation tax is 20% (£19,600) which means she saves a cool £400!



What are the conditions of claiming as a charitable donation? 

You can only get relief for a charitable donation through your company if: 

the company is making a profit

Example: if your company makes profits of £1,000 (before tax) and you make a company donation of £1,200 you will only get Corporation Tax relief on the first £1,000.

If you receive anything in return (e.g tickets for an event), it must be below a certain value of the amount you’ve donated.

 

Donation Amount Maximum Value of Benefit
Up to £100 25% of the donation
£101 - £1,000 £25
£1,001 and over  5% of the donation (up to a maximum of £2,500)


This applies to any person (including relatives) or company associated with your company.


Personal donations

If you’re a higher rate taxpayer or you want to make donate an amount that’s more than your company’s profits, then making a personal donation could be a better option. 

Unlike donating as a company, personal Gift Aid donations are worked out using the Net of basic rate tax 

(rather than the Gross). The charity can then reclaim this amount from HMRC. 

Example: As an individual wanting to make a donation of £100 you can simply donate £80. The charity will then claim the basic rate tax from HMRC, making the donation a grand total of £100. 

If you are a higher-rate taxpayer, then you can claim tax relief on the differencebetween the basic rate tax relief the charity has already claimed, and the higher rate.

Example: you make a donation of £10, the charity can claim £2.50, and you would get a further £2.50 in tax relief because the higher rate is 40% and the charity has already claimed 20% of that.

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