Just giving?

A look at how to put your donations to work

05 December 2018

3.5 minute read

There are several steps you can take to ensure your charitable donations are used appropriately and make a real difference.

There are more than 157,000 registered charities in the UK which amassed total annual income of £77.4bn in the twelve months to the end of September 20181.

The philanthropic gene is strong in the nation’s DNA – the UK is the 6th most generous nation in the world when it comes to charitable donations2 – which is particularly important during a time of austerity when government support is stretched thin.

However, some charities are struggling with reputational issues. Accusations of heavy-handed fund raising practices have persisted in the headlines since 2015, and with more than tens of thousands of charities to choose from, finding a safe home for well-meaning donation can be challenging.

There are several steps that you can take to ensure your money is to put to work appropriately and makes a real difference.

1. Decide how much to give

There’s no hard and fast rule, but it’s worth considering a donation plan. Your time of life and your tax and employment status are just some of the considerations which will determine how much to donate.

It’s often worth starting with a modest donation and gradually building up to something more substantial. This allows time for you to see how the money is being put to work, and that the charity is meeting your expectations.

Irrespective of the donation, all charities are entitled to Gift Aid which means they can claim an extra 25p for every £1 you give. If you pay tax above the basic rate you can claim the difference between the rate you pay and basic rate on your donation. For example, if you donate £100 to charity, they can claim Gift Aid to make your donation £125. If you pay 40% tax, you can claim back £25.

2. Choose how to give

The key here is how much time you have to dedicate to charitable giving. Setting up a dedicated charitable foundation clearly takes more time and commitment, but you may choose simply to write a cheque, donate online or set up a standing order.

Donor advised funds (DAFs) are another way to contribute. These act like a charitable bank account and are usually run by foundations (see below). Donors pay an irrevocable amount into the DAF on which they receive immediate tax relief. The balance is invested so it can benefit from growth, and grants are made at the donor’s request.

3. Pick your cause

It’s worth taking the time to identify a cause that really matters to you. Narrowing the field as much as possible allows you to focus your financial power on a specific problem where it may make more difference. For example, funding a baby care unit rather than donating to the hospital as a whole. The more passionate you are about the subject, the easier it is to engage with your charity and make a difference.

4. Find your charity

It’s important to try and take emotion out of the equation when finding a charity. Charities rely on emotive marketing to attract donors but this can distract from understanding the organisation’s fundamentals.

Websites are the starting point for finding out how the charity is run. A robust charity should be able to demonstrate several sources of funding rather than overreliance on a handful of donors, and have between three to six months running costs. They should also have clear evidence of where their efforts are making a difference. Once you’ve identified one or two charities of interest, speaking to them on the telephone will give an additional feel for how they treat donors.

Given the number of charities in the UK, visiting a community foundation is an excellent way to find a relevant, local organisation. There are 46 community foundations throughout the UK which put businesses and individuals in contact with charities in their area. To find out more, visit https://www.ukcommunityfoundations.org/about-us

5. Keep it under review

You need to be sure your donation is making a difference. Your charity should agree to provide updates about the impact your money has had. This is particularly important if you plan to gradually increase your financial support over time. At the end of a set period (three years is recommended), it’s worth evaluating how the relationship is progressing. It’s important that the charity hasn’t become dependent on your donations, and that you’re still happy to contribute to this one cause.

Philanthropy can be rewarding for all parties but getting involved with a charity should be done carefully. You should seek advice on how much to donate, and consider using a foundation to help find a reputable, relevant charity. By following some simple steps, you can make a real and long-lasting difference.

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