FWIW my tentative conclusion was that the best option for savings small-ish sums for giving later is a straightforward ISA. You don’t get any immediate tax relief from paying into the ISA (you’ll get this when you donate the money to charity) but you do get (tax-free) growth, and retain flexibility in when and how the money is donated. Returns are important if you think you might wait a long time before giving, flexibility seems important if one’s motivation for giving later is the possibility of some high-leverage opportunities in the future. The main downside is that you can’t easily bind yourself into future donations this way, but I thought this was outweighed by the other factors in my own case.
You don’t get Gift Aid until you actually make the donation
If you don’t donate in a given tax year you won’t get the Gift Aid for that tax year at all, if I understand right—the tax relief is lost.
The appeal of a DAF is you can claim the Gift Aid/tax deduction immediately but defer donating. I think you can also put securities in the DAF, so growth on it would be tax-free presumably.
Yeah, and how much you value the flexibility depends on what you expect to donate to.
EA Funds already allows you to donate to small/speculative projects, non-UK charities, etc, via a UK registered charity, so ‘only ever donating to UK charities’ is less restrictive than it sounds..
I spent an hour or so looking into this recently, and couldn’t find any DAFs that were suitable for small donors. It’s possible I missed one, though.
CAF offers a ‘giving account’, which is effectively a low-interest savings account. You can get immediate tax relief for deposits, but forgo returns, and can only donate to UK registered charities, so seems like a weak option: https://www.cafonline.org/docs/default-source/personal-giving/2573h_charityacc_web-app_pdf_220519.pdf
FWIW my tentative conclusion was that the best option for savings small-ish sums for giving later is a straightforward ISA. You don’t get any immediate tax relief from paying into the ISA (you’ll get this when you donate the money to charity) but you do get (tax-free) growth, and retain flexibility in when and how the money is donated. Returns are important if you think you might wait a long time before giving, flexibility seems important if one’s motivation for giving later is the possibility of some high-leverage opportunities in the future. The main downside is that you can’t easily bind yourself into future donations this way, but I thought this was outweighed by the other factors in my own case.
Hm, the fees on the CAF account look pretty steep—seems like it eats 4% of everything you put in there up to £22k, and 1% thereafter.
Yeah—plus the opportunity cost of having it in cash. Looks like a non-starter.
If you don’t donate in a given tax year you won’t get the Gift Aid for that tax year at all, if I understand right—the tax relief is lost.
The appeal of a DAF is you can claim the Gift Aid/tax deduction immediately but defer donating. I think you can also put securities in the DAF, so growth on it would be tax-free presumably.
Yes that’s what I meant—will edit for clarity
Gotcha. Thanks for the answer—I guess UK DAFs will only ever allow you to donate to UK charities, so maybe the lack of flexibility isn’t worth it.
Yeah, and how much you value the flexibility depends on what you expect to donate to.
EA Funds already allows you to donate to small/speculative projects, non-UK charities, etc, via a UK registered charity, so ‘only ever donating to UK charities’ is less restrictive than it sounds..