Land and Property for Donors
Another tax-effective way that you can give is by donating land or buildings, either in their entirety or a proportion of the holding, to charity. There may be generous Income and Capital Gains Tax relief available to you if you give in this way to a UK, EU, Norwegian or Icelandic charity that is registered with HMRC.
What gifts of Land or Property attract tax relief?
Any land or buildings are eligible for the relief as long as the whole of your interest in the property is handed over to the charity. You therefore could not donate your family home and claim the tax relief but continue to live in it, as you would be retaining an interest in the property.
How does the tax relief work?
The relief works in much the same way as Gift of Shares. Tax relief will be given for the market value of your property as a deduction from your income tax liability for the tax year in which the gift is made. Additionally, you may be eligible for exemption from Capital Gains Tax on the appreciation of the property value that you would have had to pay if you had simply sold the property.
If you pay income tax at 40%, your income tax bill could be reduced by 40% of the value of the gift.
If you pay tax at 50% your income tax bill would be reduced by 50% of the value of the gift.
The market value of the property is what it would fetch if sold. It may be worth obtaining a valuation of the property before making the gift so you have a tangible figure to put onto your self assessment tax return.
The amount that can be deducted from your tax liability is:
- The market value of the property PLUS
- Any associated costs of transferring the property such as solicitor’s fees MINUS
- Any proceeds of the sale, or the value of any benefits that you receive as a consequence of making the gift
How can I claim the relief?
Any gift of property that you make to a charity is likely to be significant in value. You should claim the tax relief by completing the appropriate section of your self assessment tax return. If you are not sent a tax return or you want to claim relief before the end of the tax year, you should contact your local tax office for advice. You must discuss all arrangements carefully with a solicitor or financial advisor before proceeding with the sale. It is also important to remember that other tax liabilities or reliefs may affect the size of the relief that you are able to claim. You are able to donate this relief directly back to a charity of your choice through your self assessment tax return.