As the festive season is upon us, it seems fitting to discuss Christmas spending and to consider whether charitable donations offer a sensible and ethical alternative to stocking fillers.
The rise in unwanted gifts
Gift giving is an inevitable part of the festive season but the amount of money that people spend on Christmas presents has been growing exponentially over the past few years. In fact, it is estimated that £700 Million will be spent on unwanted Christmas gifts this year. Whilst a singing tie may be funny on Christmas morning, online auction sites are awash with such novelty gifts on the 26th December. This Christmas hangover leads to a January of re-gifting and overflowing bins full of unwanted tat.
With so much money being wasted on unwanted presents each year, a charitable donation to a cause close to a loved one’s heart is becoming an increasingly attractive alternative to materialistic gift giving.
The charitable alternative
More and more charities are recognising the large sums of money that are wasted on unwanted Christmas presents each year and are asking for donations as an alternative to stocking fillers. Charities now actively advertise Christmas donations as personal presents to ensure money is being spent on something important. From purchasing lifesaving vaccines to buying a homeless person Christmas dinner, there is a charitable donation out there for everyone and these donations are becoming increasingly popular as Christmas presents.
The tax system offers some modest encouragement here. Gift Aid is a tax relief that benefits charities and Community Amateur Sports Clubs. Tax payers in the UK can elect to increase donations to charities by 25% with no additional costs being passed to the donors or charities. For every £100 donated, charities can receive an additional £25 from HMRC. To claim gift aid two key requirements must be met:
- The donor must be a UK taxpayer and have paid at least as much Income or Capital Gains Tax as the amount of gift aid being claimed by the charity (in the same tax year).
- A gift aid declaration (GAD) must be made by the donor.
For higher or additional rate tax payers, thinking of others at Christmas can also benefit their tax position. Those paying income tax at 40% can claim back £25 for every £100 donated and those paying income tax at 45% can claim back £31 for every £100 donated. This can be claimed by individuals directly or can be passed onto the charity itself at the discretion of the donor.
It may not feature highly on many Christmas lists, but being aware of gift aid rules can offer benefits to both charities and tax payers alike. So, in late December when you are browsing the high street for stocking fillers and writing your carefully penned letter to Father Christmas, think about the charitable alternative that everyone will appreciate over the festive season!