UK charities have access to several tax reliefs, but knowing what you can claim is only part of the picture. You also need to meet the relevant conditions and keep the right records.
Gift Aid is a good example. Eligible charities can reclaim basic-rate tax on qualifying donations from individuals. Yet some charities still miss claims because the required declarations or records are not in place.
Other areas are worth checking too. Charities can usually claim tax exemptions on income and gains used for charitable purposes. Business rates relief and certain VAT reliefs can also reduce the cost of running a charity.
TAJ Accountants works with charities and social enterprises across London on their tax and accounting needs. This guide looks at the main tax reliefs available to UK charities in 2026 and explains what you need to do to claim them.
What Is Tax Relief for Charities?
Tax relief for charities includes exemptions, reductions, and tax reclaims available to charities that meet HMRC’s requirements. The charity must be recognised by HMRC and use its income for charitable purposes.
Charities can benefit from several important reliefs. These include exemptions from tax on most qualifying income and gains, Gift Aid reclaims, charitable business rates relief, and specific VAT reliefs.
These reliefs are not simply automatic. Charities need to meet the relevant conditions and keep proper records to support their claims. Income used for non-charitable purposes can also become taxable. For this reason, understanding which reliefs apply and keeping the right documentation is essential when managing a charity’s tax affairs.
What Changed for Charities in 2026?
From April 2026, several changes to the charity tax rules came into effect. These affect areas such as tainted donations, charitable investments, and income from legacies.
The updated rules are intended to strengthen compliance and make sure charitable tax reliefs are used for genuine charitable purposes. Charities should review their donation arrangements, investments, and legacy income to ensure they meet the new requirements.
HMRC also updated its charity tax guidance during 2026, including guidance covering Gift Aid and other charitable tax reliefs.
Gift Aid
Gift Aid allows charities to reclaim 25p for every £1 donated by a UK taxpayer, at no extra cost to the donor. The donor must have paid enough Income Tax or Capital Gains Tax to cover the amount the charity reclaims. Also, the donor needs to complete a Gift Aid declaration for the charity. Higher- and additional-rate taxpayers can claim further tax relief through Self Assessment. Charities must keep accurate Gift Aid declarations and records. They are also responsible for making sure their claims to HMRC are correct.
Donating Straight from Your Wages or Pension
Payroll Giving allows employees and pension recipients to donate directly from their gross income before tax is deducted. This means tax relief is received immediately rather than through a Self Assessment claim. For every £1 donated through Payroll Giving, a basic rate taxpayer pays 80p, while a higher rate taxpayer pays 60p. An additional rate taxpayer pays 55p. The scheme must be available through the employer or pension provider. Payroll Giving cannot be used to donate to community amateur sports clubs.
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Donating Land, Property or Shares
Donating qualifying land, property, or shares to a registered charity can provide both Income Tax and Capital Gains Tax relief. The same will apply when an asset is sold to a charity for less than its market value, subject to the relevant conditions. The value of a qualifying donation is deducted from total taxable income for the year. Assets gifted directly to charity are generally exempt from Capital Gains Tax. Where an asset is sold below market value on behalf of a charity, the gain is generally based on the actual sale proceeds. Keep records of the gift and the charity’s request to support the tax treatment.
Leaving Gifts to Charity in Your Will
Leaving money or assets to a charity in your will reduces the value of your estate for Inheritance Tax purposes. The charitable gift itself is exempt from IHT. There is another benefit worth knowing about. If you leave at least 10% of your net estate to charity, the IHT rate on the relevant part of the estate can fall from 40% to 36%. For 2026/27, the nil rate band is £325,000, and the residence nil rate band is £175,000. These thresholds are fixed at these levels for the relevant period. If you are considering a charitable gift in your will, HMRC also provides a calculator to help work out whether the 10% threshold is met.
Conclusion
Understanding the available tax reliefs helps charities make better use of their funds and avoid unnecessary tax costs. With the 2026 changes, keeping your records and processes up to date is more important than ever.
If you need help reviewing your charity’s tax position, TAJ Accountants is a small business accountants firm supporting charities and not-for-profit organisations across London. Contact us to discuss your requirements.
Frequently Asked Questions
The scheme allows eligible charities to claim a 25% top-up on small cash and contactless donations of £30 or less. No Gift Aid declaration is needed from the donor. Charities can claim up to £8,000 of donations each year, subject to the scheme’s conditions.
No. UK charitable tax reliefs, including Gift Aid, are generally restricted to qualifying UK charities and UK community amateur sports clubs. Overseas charities do not qualify simply because they are recognised as charities in their home country.
Generally, yes. Qualifying charities are exempt from Corporation Tax on most income and gains when these are applied for charitable purposes. However, income from non-primary purpose trading can be taxable if it exceeds the relevant exemption threshold.
Charities can receive 80% mandatory business rates relief for properties used wholly or mainly for charitable purposes. Local authorities can also provide additional discretionary relief. The relief must be applied for and is not automatic.
HMRC can recover tax that should have been paid and may impose penalties. Incorrect Gift Aid claims can also require the charity to repay the amount claimed, with interest. Serious cases of non-compliance can have further consequences for trustees.
Not necessarily. Smaller charities with straightforward tax affairs may manage their own compliance. However, professional advice can become useful when a charity has investments, property transactions, legacy income, or more complex tax matters.
