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Sharing Your Shares! |
Sharing your shares
Giving to charity whilst beating the taxman is an extremely enticing thought. Now, there is a way to donate that has the taxman paying you for your generosity.
I can hear the disbelief and scoffing. But this is possible with Share Giving.
Donating stocks and shares has become one of the most tax-effective ways to give. A gift of shares has always been free of capital gains tax. Since April 2000, the value of the shares can now also reduce the donor's taxable income.
There are two ways to give.
Option A Paula gives £10,000 worth of shares to St Luke's Hospice, to sell or retain as an investment. Paula is a higher rate taxpayer so gets tax relief on up to £10,000 at 40%.
So the gift has cost Paula £6,000 and St Luke's Hospice has received £10,000 worth of shares.
Option B Paula sells the shares and gives the proceeds to charity under Gift Aid.
Gross proceeds of sale of shares are £10,000
less capital gains charge (£2,500 @ 40%) £1,000
Net proceeds after tax of £9,000
Under Gift Aid, the charity can recover the basic rate of tax (22%) paid on the gift.
So, if Paula gives the £9,000 to a charity under Gift Aid, the charity can reclaim £2,538.46.
As Paula is a higher rate taxpayer she can claim tax relief on the difference between the basic rate (22%) and higher rate (40%), which is £1,620.
The total gift to St Luke's is worth £11,538.46, costing Paula £7,380.
With the number of people owning shares increasing, St Luke's would urge people to consider this tax effective way to help the Hospice.
The Inland Revenue has a leaflet "IR178: Giving Shares and Securities to Charity". |
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