Philanthropy is often seen as a private thing, separate from business interests, markets and fiscal policy, but of course, it is deeply intertwined. So, what does the Chancellor’s mini-budget mean for your charitable giving, and what is Good Works advising its clients?

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The new fiscal policies announced mean good news for philanthropy in the short term, but leave some deep-seated issues unaddressed which may hamper longer-term philanthropic impact.

First, the good news. Philanthropic gifts just became even more tax-efficient, at least in the short term. Until April 2023, philanthropists will benefit from an effective GiftAid rate of 31.25 per cent on cash donations and income tax relief at 45 per cent on gifts of listed shares or property alongside CGT exemption. If you or your clients are planning on making a significant donation to your donor-advised fund, or are considering setting one up, now is the time. The Chancellor has also confirmed that charities can continue to claim a base rate of GiftAid at 20 per cent until April 2027, slightly improving the tax efficiency of cash gifts for four years and ameliorating the impact on reducing the income tax level on charitable income in the medium term.

However, longer-term there are worrying signs that philanthropy will become not only more vital but more capital will be needed to plug the gaps left by this budget, limiting overall philanthropic impact. The elephant in the room is that this budget did little to materially support poorer households, which are facing unprecedented pressure through a perfect storm of sky-rocketing inflation and energy bills. Where once the state stepped in as the safety net, now charities and food banks are the last lines of defence. These organisations will need more donations to meet the rising need – but they have problems of their own.

Charities are facing the same financial pressures, combined with their main income source – donations – likely to decline as a result of the economic headwinds facing individuals across the UK. At a time when they are needed most, charities are struggling to raise funds to meet demand. Those who want to support local charities may find that their donations and impact are more limited, with resources being diverted from transformational long-term projects towards simply keeping the lights on and providing vital services. For those giving internationally, the falling value of the pound following the budget announcement means that it will require increased philanthropic capital to continue supporting projects at the same level.

So, what are we advising our clients with donor-advised funds through Good Works?

Firstly, we are advising that they bring forward any significant gifts to maximise tax efficiency and provide vital income to charities for what is going to be a tough economic climate for the coming year. We are also working with them to reassess their charitable portfolios to offset the impact of currency devaluation on international gifts and helping them to identify where they can have an impact in supporting poorer households through charitable organisations. As more stories of struggling families are published in the coming months, we want our clients to know they have done what they can to support vulnerable people across the UK. Lastly, we are working with the charities our clients support to assess their needs and make our donations as flexible as possible to ensure they have the resources they need to continue to provide vital services.

The budget is good for tax-efficient giving, but it highlights the increasing need for professional advice and support for philanthropists to make the best impact with their capital in what will be a challenging year for poorer households and the charity sector.

If you’re considering setting up a Good Works donor-advised fund or would like advice on your philanthropy and the impact the mini-budget could have on your charitable giving, reach out to me at allan@goodworkscompany.org.

Allan McKinnon is the Founder and Director of the Good Works, a philanthropy advisory service and donor-advised fund.

This piece was first published by Allan McKinnon on LinkedIn on 26 September 2022. It is being re-shared in Alliance with permission.