Giving to charity is something many people want to do more of, yet few realise that how you give can make a big difference to both you and the cause you support.
In the UK, donating appreciated shares directly to a charity is one of the most tax-efficient ways to give. It offers two major tax relief benefits, and for those who hold investments, it can often be far more effective than selling the shares first and donating the cash.
When you donate qualifying shares directly to a UK registered charity, two forms of tax relief come into play:
1. Capital Gains Tax (CGT) relief
You pay no CGT on the increase in value of the shares since you bought them. If you were to sell the shares first and then donate the proceeds, you would normally owe tax on any gain.
2. Income Tax relief
You can also claim income tax relief on the full market value of the shares at the time of the gift. This means you can deduct the value of the donation from your gross income, reducing your overall tax bill. The level of relief depends on your tax rate — basic, higher, or additional.
Let’s say you are a higher-rate (40%) taxpayer and you own shares that you bought for £10,000. They are now worth £25,000.
The Capital Gains Tax saved on £15,000 is £3,000. Income tax relief at 40% on £25,000 market value is £10,000. This gives a total savings of £13,000
Meanwhile, the charity receives the full £25,000.
If you had sold the shares first, you would have paid £3,000 in CGT, leaving £22,000 to donate. The charity would still be grateful, of course, but the direct share donation is simply more efficient.
If you are considering this route, here is how to do it properly:
1. Check that your shares qualify
HMRC rules state that the shares must be listed on a recognised stock exchange, AIM, or be units in authorised unit trusts or OEICs.
2. Contact the charity
Not all charities can accept shares directly. Larger organisations often have a broker who can manage the transfer. For smaller holdings, you can use an organisation like ShareGift, which pools donated shares and distributes the proceeds to charities.
3. Transfer the shares
If you hold physical share certificates, you and the charity will complete a stock transfer form. If you hold the shares electronically (for example, via a platform or broker), they will handle the transfer for you.
4. Claim your tax relief
When completing your self-assessment tax return, include the donation under “Charitable giving.” Keep evidence such as the transfer form and the share valuation at the time of donation.
Donating shares is a powerful way to combine generosity with smart financial planning. It can reduce your tax bill, increase the value of your giving, and ensure more of your wealth goes towards causes you care about.
At The Wealth Coach, we often remind people that financial wellness is not just about what you keep, but what you give — and how you give it.
Nic Round is a Chartered Financial Planner and Chartered Wealth Manager, authorised and regulated by the Financial Conduct Authority.