This 'investment' turns every £1 you contribute into at least £1.28. The only problem is that you have to give it all away!
There are a few investments where it's possible to see dramatic overnight gains. For example, thanks to 22% tax relief, putting £100 into a pension means £128 gets invested for a basic-rate taxpayer. Similarly, 40% tax relief turns £100 into £167 in a higher-rate taxpayer's pension. Another example is investing in a Venture Capital Trust: each £1 you invest becomes £1.67 thanks to tax relief at 40%.
However, there is another 'investment' that attracts tax relief, but it involves giving your money away. It is, of course, charitable giving under the Gift Aid scheme.
Compassionate giving is front-page news at the moment, with British charities launching a major appeal to help the people of the Darfur region of Sudan, where militiamen have forced over a million people out of their homes during a brutal conflict. (You can give to the Darfur appeal via the Disasters Emergency Committee website or by credit card on 0870 60 60 900.)
The great thing about charitable giving in the UK is that the Treasury steps in to lend a hand. Gift Aid donations from taxpayers attract basic-rate tax relief at 22% at the very least. What this means is that a gift of £78 pulls in £22 from the taxman, giving a total of £100. (A gift of £100 therefore becomes 100/0.78 = £128.20.)
What's more, if you're a higher-rate taxpayer, you can claim back a further 18% of the sum that the charity receives. So, a £100 gift becomes £128.20, plus you get back 128.2 x 0.18 = £23.08. In other words, your gift costs you £76.82 (£100 less £23.08), but the charity gets £128.20. Magic!
You can make a Gift Aid donation of any sum, no matter how small, and all you have to do is make a Gift Aid declaration, which usually involves ticking a box or saying that you want to use Gift Aid. Most charities accept payments by cash, cheque, credit or debit card, direct debit or standing order. You can also donate via Payroll Giving, where your employer handles all the tricky tax stuff.
Finally, you can gift shares and other financial securities to charity and get tax relief on their market value. What's more, you can use Sharegift to donate holdings of shares with little value (old Marconi shares perhaps?). Also, you don't have to pay capital gains tax on any shares you give to charity. Learn more here.
So, if the stock market has been kind to you over the last year, or you're saving a fortune by using a 0% credit card, why not give make yourself feel good by spreading some of your good fortune around? And, after following these 25 quick money-saving tips, you should have plenty of cash to spare!
More: Check out our Charity Fools discussion board | Giving to charity by individuals (PDF file).
