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Give and receive this Christmas

Give and receive this Christmas

Charles Calkin, Partner, Financial Planner
Charles Calkin, partner and financial planning consultant

Charles Calkin, partner and financial planning consultant

I can remember no election that left so many people worrying about tax raids on their hard-earned savings. It coincided with the festive season, when we should be thinking not of protecting our wealth but of sharing it.

Though many do not realise it, HMRC seems to have taken to heart the gospel principle of “give and you shall receive”. It means that you can share your wealth and protect it (or at least some of it). Whether the new government allows this generous tax spirit to last long into 2020 is another matter.

Here are steps you might consider over Christmas while the opportunity exists and you are in the mood to give.

Gift aid

gift aid form bannerAt the moment if you are paying sufficient tax and donate to registered charities using gift aid, the charity receives a 25% uplift on your donation. On top of that, higher-rate (40%) taxpayers and additional-rate (45%) taxpayers can claim back the difference between the basic rate of tax and the tax they paid (20-25%) – usually by reducing their income tax bill.

There is also the very useful facility to carry back donations to the previous tax year. This is particularly so if the top rate of tax paid in that year was higher.

For those people whose earnings take them into the £100k to £125k bracket, gift aiding can be particularly helpful. For every £2 you earn in this bracket, you lose £1 of your tax-free personal allowance. This is on top of paying 40% income tax. The effect is a marginal tax rate of 60%.

Many clients in this position give money earned over £100k to charity to avoid being dragged into this higher tax rate. They are effectively enjoying a further 35% rebate on their donations.

Some people think it wrong that wealthy donors get this kick-back. You do not have to claim it (in fact many people forget to). You could use it to help give even more than you might have. But then you may also want to take advantage of it for yourself while you can.

Gift aid life membership

In which case, how about digging in your pocket and buying yourself life membership of the RHS? You can take a family guest or two children to gardens free. It is a snip at just £1,375 (which, gift aided, is worth over £1,700 to the gardening charity). A green-fingered additional-rate taxpayer can knock £429.68 off this year’s income tax bill as a result. Standard joint lifetime membership of the National Trust is £2,160 – giving the charity £2,700. An additional-rate tax paying donor enjoys a potential £675 tax rebate.

Christmas giving banner image of RHS Wisley glasshouse borders

The glasshouse winter borders at RHS Wisley


Buying yourself life membership of the RHS could reduce your income tax bill by over £400.

You will have to check with organisations before opting to buy lifetime memberships for the tax benefits. The HMRC rules are complex. Organisations have different interpretations of what counts for gift aid and what does not, depending on the benefits offered.

Tag a bag

Giving your family gifts of membership to services like Spotify and Audible are obviously not gifts to charity, but they might allow you to declutter your house and get rid of a lot of old books and CDs. Give them to a charity shop that runs a gift aid scheme and you can claim tax back on anything raised from selling them. These “tag a bag” schemes are particularly handy if you are house clearing on the death of a loved one. Often you have to pay for this service, but by ferrying items to charity shops and gift aiding the donations you can actually make a charity and yourself some money.

Giving shares and items

Another useful option if you are sitting on shares or items fat with gains and worried about being clobbered with Capital Gains Tax (CGT) when you sell them is to donate them to a charity instead. They can exploit their tax-sheltered status to dispose of them free of CGT. They cannot claim gift aid on this donation, but you can offset the gross gift for income tax. If you are thinking of a making a sizeable gift to a charity, doing it this way allows you to duck a CGT bill and reduce your income tax at the same time. The same applies to items like valuable paintings or collectibles whose sale would trigger a CGT bill.

Legacy gifts

One tax benefit I do not see changing suddenly is the opportunity to reduce Inheritance Tax (IHT) bills by gifting 10% of your net estate to one or more registered charities on your death. Doing so reduces your IHT rate from 40% to 36%. If you intend leaving somewhere between 4% and 10% of your net estate to charity anyway, your beneficiaries will be better off with you giving the full 10% instead. It is an unusual Christmas gift, but under the current tax regime revisiting your will to exploit this opportunity could result in your loved ones and the charities you care about receiving thousands more at the same time.

Passing on assets

The election result does not bring any real certainty about what will happen next. I would always suggest that you make the most of the tax opportunities you have now and worry about what is to come later. If you were already planning to make large gifts to family members in the near future, you may want to bring those plans forward. There is no guarantee that these gifts will not fall under some new tax regime, but sharing wealth around can be a sensible way of mitigating tax.

My final word of warning is not to give away too much – especially if it is just to avoid taxes or the threat of them. Reckless generosity can leave you struggling later in life. Give, but only what you can afford.

Greenhouse Sports runs 50 sports programmes for disadvantaged children in London.


Our own chosen charity is Greenhouse Sports which transforms the lives of London children through sport.  Many are disengaged, vulnerable or facing disadvantage. The charity’s work helps them to develop the social, thinking, emotional and physical skills to thrive. You can donate here if you would like to join us in supporting this important charity.

Charles Calkin

Posted on 13th December 2019


A version of this piece first appeared in the Financial Times.

Opinions and views expressed are personal and subject to change. No representation or warranty, express or implied, is made of given by or on behalf of the Firm or its partners or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this document. And no responsibility or liability is accepted for any such information or opinions.

The value of an investment and the income from it can go down as well as up. And investors may not get back the amount invested. This may be partly the result of exchange rate fluctuations in investments which have an exposure to foreign currencies. Fluctuations in interest rates may affect the value of your investment. The levels of taxations and tax reliefs depend on individual circumstances and may change. You should be aware that past performance is no guarantee of future performance.