How you can help cash-strapped charities keep up and running

When this year’s London Marathon finally took place earlier this month, the slimmed-down field spelled bad news for charities.

For 13 years, the annual event had been the largest single-day fundraiser in the calendar, with 2019 bringing in £66.4m for a variety of good causes.

This year, with just elite runners on the course, and others forced to take part in a virtual version, the figure slumped to £16.1m.

It’s an illustration of the huge difficulties faced by charities, one in 10 of which are expected to face bankruptcy by the end of the year as they struggle to deal with a drop in donations.

The Charities Aid Foundation (CAF) says that the number of people giving cash, usually the most popular choice, has dropped during the pandemic.

On top of this, shop closures have also cost causes dear: Oxfam says it lost £5m a month, while Save the Children UK says it will be down by £16m.

Cancer Research UK is expecting a drop of £160m this year. “While we remain committed to making progress for people affected by cancer, the reality is we face more tough decisions and difficult times ahead, so we’re relying on donations from the public more than ever,” says director of trading Julie Byard.

Sarah Coles, personal finance analyst at IFA Hargreaves Lansdown, says that while some charities have benefited from high-profile fundraising events, the pandemic has dealt a serious, possibly fatal, blow to others. “Fundraisers have been axed, charity shops shut, and donations cut – all at a time when the need for help has soared,” she says.

It’s not all bad news. More people are donating online and just one in 20 have dropped a standing order to a charity, according to the CAF.

“During the lockdown, giving levels by individuals resembled levels that we would normally see in November and December – peak giving months. Those who could give, did so – that’s welcome good news,” says Caroline Mallan of CAF.

With charities needing our help more than ever, and some of us struggling for cash, too, what’s the most efficient way to support them?

Giving through payroll

Some employers offer payroll giving schemes where your contribution is taken from your earnings before you are taxed – but after your national insurance contributions have been deducted. This way your donation is worth more to the charity than it is to you in your pay packet.

Your employer will need to be part of the payroll giving scheme for you to do this – you cannot go directly to a scheme provider or the charity.

The downside is that payroll giving agencies can charge fees for administration, which may come from the donation if you employer does not pay it. The most popular scheme is the CAF’s Give As You Earn, which works with 2,700 companies and 250,000 staff to give more than £74m to charity each year.

Gift Aid

When you give to a charity, the donation can be made greater by signing a Gift Aid declaration which means that the charity can reclaim the basic rate tax you have already paid. As a result, a £1 donation is worth £1.25 to the charity. You must make a declaration to each charity you want to donate to. If you are a higher-rate taxpayer, you can claim back the difference between what the charity gets and what you would get if you had full tax relief. So on each £1 donation you can claim back 25p. You need to do this via your self-assessment form.

Giving shares

A relatively unknown but tax-efficient strategy, giving shares means that you don’t have to pay capital gains tax on any growth and you can claim income tax relief on their value. In other words, you can subtract the value of the donated shares from your total taxable income before tax is calculated. “If you hold small amounts of shares, which aren’t worth the cost of selling them, this can be a useful way of getting full value,” says Coles.

For donations of less than £500, charities often recommend using ShareGift, a charity which places them into a portfolio until there are enough to sell. It then donates the money to other charities. “Although you can say where you would like the money to go, the charity won’t necessarily receive it – it choses where to send it based on the value of donations and the number of nominations each charity receives,” says Coles.

Leaving money in your will

“In tough times, it can be difficult to free up money for donations, but one option is to leave money in your will,” says Coles. “This doesn’t just mean making a difference to a cause you care about, it can work in your favour, too.”

The money will come out of your estate before it is assessed for inheritance tax. Furthermore, if you leave at least 10% to charity, the rate of inheritance tax your family is charged goes from 40% to 36%.

However, there are some issues to be aware of. Coles warns that naming the charity in the will means that it will be aware of the donation, and may chase it up in the case of any delay, which can be distressing to a family. She suggests mentioning the gift in the will and then detailing the recipient in an adjoining letter. Having a letter detailing your decision could help reassure your family that you made a deliberate choice, and prevent them from challenging the will. Also, include the charity number in the letter so there are no misunderstandings as to the recipient.

Leaving a fixed sum may affect how much the other beneficiaries will get if your circumstances change. You may have to incur the costs of going into a nursing home, for example, which will mean the amount you had originally specified to give makes up a much bigger part of the estate. A way around this is to set a percentage figure to be given to charity.

In all cases, it’s wise to tell your family of your plans so there are no surprises when you die.

It doesn’t have to be cash

According to the CAF, one in six people volunteered for a charity over the last year. This doesn’t have to be working in a shop or rattling a donation box, it can include offering pro bono professional advice such as in legal or accountancy services.