As the new year arrives, with its crisp diaries and good intentions, it feels like the right time to get things properly in order.
Although last year’s budget might seem like a distant memory (approximately 280 roast potatoes ago), there’s a lot that bears revisiting. Especially for high earners.
The biggest news was that income tax thresholds remain frozen until the end of the 2030-2031 tax year.
The freeze means more people will drift into the higher-rate tax bands without a proper pay rise. You may suddenly find yourself earning over £50,270 and paying 40% tax or edging further into the additional-rate band above £125,140.
At the same time, pension contributions, once a dependable way to reduce both income tax and National Insurance, are set to become slightly less efficient. From April 2029, the National Insurance exemption on salary-sacrifice pension contributions will be capped at £2,000 a year. Any salary sacrificed above that level will still receive full income tax relief but will once again be subject to employee and employer National Insurance.
All of this makes January the perfect moment to revisit charitable giving.
Most people know the basics. When you donate to a registered charity and tick the Gift Aid box, the charity can reclaim the basic rate tax you’ve already paid, topping your gift up by 25%. A £1,000 donation becomes £1,250 to the organisation straight away. What far fewer realise is that higher and additional-rate taxpayers can go further, reclaiming the difference between their tax rate and the basic rate.
If you pay 40% tax, you can claim back £250 for every £1,000 you give. If you’re in the 45% band, the reclaim rises to £312.50. The charity gets more, you reduce your taxable income, and the total cost to you is lower than the figure on your receipt.
And the benefits don’t stop at a simple refund. Depending on your income level, declaring charitable donations can help you stay below the thresholds where personal allowance tapers away, or where child benefit is clawed back. For some households, declaring charitable donations can even bring adjusted net income back under the £100,000 threshold, the point at which funded childcare hours are withdrawn. That reclaim can be substantial, far outweighing the effort of completing a self-assessment or asking HMRC to adjust your tax code.
And if you’re deciding where to direct your giving, MK Community Foundation is a solid and strategic choice. It has a clear view of the pressures and opportunities across Milton Keynes, backed by long-
standing relationships with local charities and community groups.
Because it assesses need across the whole city, it can distribute funds where they will have the biggest impact, supporting projects like MK Money Lifeline, which expanded its Financial Resilience and Debt Support Project so people can get help before reaching breaking point and stay in their homes; The Hygiene Bank, which delivers essential items such as shampoo, deodorant and toothpaste to families; and UnityMK, which has extended its crisis centre to five days a week, supporting newly homeless residents each day and offering food, showers, guidance and a safe place to turn.
Call 01908 714239 to discuss charitable giving with the philanthropy team or visit the Community Foundation website
This guidance on tax-efficient giving is provided for informational purposes only and should not be considered financial or tax advice. Milton Keynes Community Foundation recommends consulting a qualified financial or tax advisor to determine what is appropriate for your specific situation.
