Here's a simple way to turn £1 into £1.28 or even £1.67 instantly. However, there is a catch: you need to be generous!
As well as being National Identity Fraud Prevention Week, 16 to 22 October is also National Giving Week. What's more, Children In Need is just a month away on Friday, 17 November, so we Brits will be digging deep to raise or donate money for good causes over the next month.
However, the problem with throwing a £1 coin into a collecting bucket is that the charity concerned will receive just that: £1 and no more. On the other hand, if you're a taxpayer and make a donation via Gift Aid, HM Revenue & Customs (HMRC) will automatically add tax relief to your gift at your highest rate of tax.
Let me show you how Gift Aid works:
Let's say that you donate £7.80 to a registered charity via Gift Aid, which involves making a simple declaration (either orally or in writing) confirming that you are a taxpayer making a Gift Aid donation. The taxman will then add 22% tax relief to this sum, which is worth an extra £2.20 to the charity. Hence, your £7.80 is worth £10 to a charity, which is instant growth of 28%. Eureka!
The news gets even better for higher-rate taxpayers, because they are entitled to 40% tax relief on gifts. Their £7.80 is turned into £10, but they can claim a tax refund of a further 18% of the gift, which is £1.80 in this example. Thus, higher-rate taxpayers turn a net donation of £6 into £10, which is a return of 67%. Not bad, eh?
According to HM Revenue & Customs, generous Brits donated £2.2 billion via Gift Aid to charities during the 2004/05 tax year, which HMRC boosted by £625 million. Even the taxman has a heart sometimes!
Gift Aid also applies to payroll giving (Give As You Earn) and deeds of covenant. However, we Brits don't use it often enough. If we made the most of Gift Aid when giving to good causes, they would benefit by an extra £808 million a year, which would be a huge boost to their coffers.
So, when you're asked to dip into your pocket for charity over the next few weeks, remember that you can turbo-charge your donation with Gift Aid. Rather than throwing a few coins in a bucket, make an online or telephone donation instead, and let the taxman give you a boost.
Lastly, according to independent financial researcher Moneyfacts, there are almost seventy 'affinity' credit cards and thirty-two savings accounts which will donate money to good causes on your behalf. However, as I warned in How To Be Generous At No Cost, these accounts usually make very modest donations to charities, typically £2.50 for every £1,000 that you spend on your card.
What's more, they are far from being Best Buys, so my advice would be to treat them with caution. Pound for pound, you'd do better by spending on a Best Buy cashback credit card and then donating your refund to charity -- with Gift Aid on top, of course!
More: Use the Fool to find table-topping credit cards, personal loans and savings accounts!
