PS- Are donations tax deductible in the UK (Besides giftaid)? Iâve been operating on the assumption that they arenât, but if they were, I could give more.
I think the short answer is âdepends what you mean?â. Longer answer:
Income tax is fully tax deductible. But if you are a basic rate (20%) taxpayer, this is what Gift Aid is handling and there isnât much further to do. If you are a higher or additional (40% or 45%) taxpayer then there is additional relief you can claim.
This post goes into more detail on this.
National Insurance is not deductible.
Some pseudo-taxes on higher earners care about Adjusted Net Income. Confusingly, ANI is not your after-tax income, itâs roughly your Gross Income minus Pension Contributions minus Donations; more detail at link. So donations do reduce this. Things which care about ANI:
Higher Income Child Benefit Charge
If you have children, this kicks in as your ANI goes from ÂŁ60k to ÂŁ80k.
Withdrawal of the Personal Allowance
This kicks in as your ANI goes from ÂŁ100k to ÂŁ125k.
30 hours âfreeâ Childcare /â Tax Free Childcare
These are withdrawn entirely if your ANI exceeds ÂŁ100k.
Note this is a cliff edge not a taper, and if it applies to you you are probably thousands worse off just above ÂŁ100k ANI vs. just below. Bizarrely this means donating money can leave you better off.
Re. 2, that maths is the right ballpark is trying to save but if donating I do want to remind people that UK donations are tax-deductible and this deduction is not limited the way I gather it is in some countries like the US.
So you wouldnât be paying ÂŁ95k in taxes if donating a large fraction of ÂŁ250k/âyr. Doing quick calcs, if living off ÂŁ45k then the split ends up being something like:
Income: 250k
Donations: 185k
Tax: 20k
Personal: 45k
(I agree with the spirit of your points.)