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The CAF Charity Account works like a bank account designed especially for charitable giving. You decide how much you want to give and pay it into your account. Because CAF is a charity, it can claim back the tax on Gift Aid donations and add it to the amount in your account. You can also fund the account through payroll giving or by gifts of shares, exactly as with any other charity.
You can start the account with a single payment of £100 or more, and can make more payments at any time.
Setting up an account in this way means that you receive all the tax benefits, whatever method you use, and you give the gross amount to the charities you want to support.
Each account holder receives their own chequebook and debit card to make payments, together with regular statements. If you have access to the internet, you can manage the Charity Account online. You can also give by telephone (to those charities that are registered to accept such donations directly), by post and by standing order.
Because tax has already been claimed back on the amount in the Charity Account, the overall administrative costs associated with claiming back tax on donations are reduced for the receiving charity. However, if you use payroll giving and want to benefit a particular charity regularly, it would be more cost-effective to give direct to the charity.
In that case, you would save the administration charge on the money going through your account. This is usually 4% of the gross value of the donation. Also because no interest is paid on your Charity Account, there could be a sizeable cost if you maintain a significant balance in your account.
Using Gift Aid to add to your Charity Account
You make a donation of £100 - £100
CAF claims back tax at 22% on what you had to earn to receive £100 net - £28.21
Total amount in your account - £128.21
CAF charge for administration (4%) - £5.13
Amount available to give away - £123.08
You can make regular payments (at least £10 a month) using direct debit or standing order, and tax will be claimed back in the same way.
If you are a higher-rate taxpayer, the three-monthly statements you will receive provide a useful record of your giving and will help you make your personal tax claim.
Using this account is an attractive method for some people. It is simple to set up and use. However, if you are giving relatively few donations, and larger amounts, it may be less expensive (and not much more complicated) to give directly to your chosen causes.
© Copyright 2007 Association of Charitable Foundations (ACF)
Every effort has been made to ensure that the information provided in A Guide to Giving is current at the time of publication (October 2005), but the Association of Charitable Foundations (ACF) cannot guarantee its accuracy. Furthermore, there may have been subsequent changes to legislation, policy and/or to tax bands and rates. If you are considering any investment you should seek appropriate professional advice. This guide is not intended to replace professional advice on particular investments or the manner in which tax relief is applied under any scheme, and you should not rely on it for such purposes. You are responsible for your own tax and financial affairs and so should seek independent advice. ACF can not accept responsibility for the investment choices you make.
Views expressed in A Guide to Giving are not necessarily those of Philanthropy UK or the Association of Charitable Foundations.
Coutts & Co is not responsible for the content of A Guide to Giving, and the content does not constitute any advice whatsoever from Coutts & Co. The case studies and profiles within the Guide are not necessarily clients of Coutts & Co. Coutts & Co shall not be liable for any loss whatsoever arising from your reliance on any information produced in the Guide.
