Starting out in philanthropy: your questions answered

Rachel Mayston in our Wills, Estate & Tax Planning team, and Rachel Vinton, Senior Philanthropy Adviser at The Kent Community Foundation, answer frequently asked questions about philanthropic giving.

Where should those with an interest in philanthropy start?

Rachel Vinton: Start by giving some thought to what is important to you and having conversations with family if also involved. If the choices feel overwhelming – there are thousands of charitable organisations in Kent and Medway alone – that’s the time to bring in expertise.

You may be thinking about those most vulnerable within local communities or perhaps you have a special cause close to your heart and you want to find more organisations supporting those impacted. With years of expertise of the voluntary sector, Kent Community Foundation, as a professional grant-maker, will support you.

We specialise in helping people to give strategically in Kent and Medway, especially with relatively small grants which have a big impact. We have a deep understanding of the landscape from over two decades of grant-making, with an unrivalled knowledge of charities and community groups, meaning we can connect you with causes that perfectly align with your values and passions.

The greatest advice is to get started and enjoy the process. Giving should be fulfilling and joyful.

What are the difference ways to give?

Rachel Mayston: In the UK there are several ways to give to charity. Donations of cash or items of value can be made directly to registered charities. This is the simplest way to give.

For more structured giving, businesses and individuals can set up their own charities to which they can donate and then these charities will make grants to other charities or charitable causes. These charities can be established as companies or Charitable Incorporated Organisations (CIOs) which allow them to operate charitable activities while benefiting from limited liability protections.

Individuals can also establish donor-advised funds, using a professional grant-maker (such as Kent Community Foundation) to take out the administrative burden of running a charity but retain the control over how funds are used. One advantage of using a grant-maker is that they can be experts with specialist knowledge on local organisations looking for support and the needs landscape in their local county.

Gifts to charity can be made in an individual’s will and such gifts benefit from being exempt from inheritance tax.

Finally, some companies run payroll giving schemes which allow employees to donate to charity directly from their salary before tax.

Can you support multiple causes?

Rachel Vinton: Yes, absolutely. In fact, that’s exactly why Kent Community Foundation exists. We help those who want to support several organisations or causes but don’t want to go through the heavy administration of setting up and running their own foundation or trust. Our team identifies causes that align with your values and visions. We manage the process of finding, vetting, and liaising with organisations, ensuring that your donations reach those which have the greatest impact.

What tax implication do you need to consider when it comes to philanthropy?

Rachel Mayston: There are lots of tax incentives to encourage charitable giving.

Donations to registered charities will qualify for Gift Aid which allows the charity to claim 25% extra on the donation if the individual making the donation is a UK tax payer. Higher and additional rate tax payers can claim back the difference between their tax rate and the basic rate on the donation through their self-assessment tax return.

Donating some assets can be very tax efficient. For example, donating shares or property will be exempt from capital gains tax and eligible for income tax relief.

As mentioned above, if gifts to charity are included in a will, the gift will be exempt from inheritance tax. In addition to the exemption, if the will leaves at least 10% of the testator’s net estate to charity, the rate of inheritance tax applied to the remainder of the estate will be reduced from 40% to 36%.

How can you involve the next generation in your philanthropic aims?

Rachel Mayston: Involving the next generation in achieving philanthropic aims can create a lasting legacy and instil in younger generations a culture of giving. One way to approach this would be to set up a family grant making charity in lifetime or by will (this can be structured as a trust, a company or a CIO) and appoint younger family members as trustees so they can participate in decision making, ensuring the sustainability of philanthropic efforts across generations.

Where other structures are used, such as setting up a donor advised fund, younger family members can still be involved in discussions regarding the values of the family and the impact of giving so they can successfully navigate charitable giving themselves and continue the family’s philanthropic vision.

What happens after funding is distributed and how do I know what difference has been made?

Rachel Vinton: First, it’s important to recognise the work that is done by a grant-maker before grants are even awarded. There is a team of experienced assessors carrying out due diligence on organisations and reviewing detailed funding applications. This means you can have confidence that your money will be used wisely. As a funder, feedback from those in receipt of grants is essential and we use this to deliver impact reports on where funding has gone and the difference it has helped to make.

If you have any further questions about philanthropy, please get in touch.