Donating to a charity through your limited company
If you donate to charity through your limited company, the full amount is allocated as a tax deductible expense, so the company pays less Corporation Tax.
Payments that don’t qualify
You can’t deduct payments that:
- are loans that will be repaid by the charity
- are made on the condition that the charity will buy property from your company or anyone connected with it
- are a distribution of company profits (eg dividends)
The most you can deduct is the amount that reduces your company’s profits to zero.
If you donate more than your total profits you can’t:
- declare trading losses on your tax return
- carry over any remaining amount to your next tax return
Donating to a charity personally
Donations by individuals to a charity are tax free, this is called tax relief.
Donating through Gift Aid means charities can claim an extra 25p for every £1 you give. You need to make a Gift Aid declaration for the charity to claim.
You need to keep record of all donations for the tax year and claim the relief for these on your self-assessment.
Your higher earnings threshold will be extended by the amount of your charity donations.