Charitable giving goes up the agenda and under the radar

Major donors are ever more vital to UK charities, which have seen their fundraising base shrink in recent years, as calls for their support have increased. The proportion of the public giving to charity at least annually has fallen from 58% in 2019 to 50% in 2024, according to the Charities Aid Foundation, albeit offset by the average donation increasing.  

Fortunately, charities’ interest in wealthy givers is reciprocated, and the UK’s half-a-million high net worth (HNW) and ultra high net worth (UHNW) individuals demonstrate significant generosity. Invariably, it’s driven by personal connections to the causes they support.  

According to another CAF report, HNW and UHNW individuals (defined as those with at least £1 million and upwards of £30mn in investible assets, respectively) donated an estimated £7.96 billion in 2023 – more than half the £13.9bn in donations given by the general population that year.  

That figure is likely to be even higher today. Philanthropy has been rising up the agenda for many of our clients, supported by a new generation. The UK is at the start of a significant inter-generational transfer of wealth, and for many younger clients who are receiving or inheriting significant wealth, giving is often among the first issues they proactively raise. The UK does not yet have as strong a culture of philanthropy as the US, but it is growing.  

It is also undeniably supported by tax reliefs that, while again falling short of those available in the US, continue to encourage and reward generosity. Inheritance tax (IHT) relief on significant donations, for instance, remains. Those leaving 10% or more of their net UK estate to a registered UK charity benefit from a reduction in the standard 40% IHT rate to 36%.  

This means that, for those already planning a significant legacy to charities in their will, increasing the gift to meet the 10% threshold can leave more of their net distributable estate to be shared among other beneficiaries. Equally, many clients look at their tax position and make a substantial charitable donation before finalising their self-assessment tax returns, reducing their tax exposure and providing a cash flow advantage – while supporting issues close to their hearts. Against a backdrop of growing needs, charities could do far less without such funds. 

While the UK philanthropy is growing closer to the US in scale, however, it is also developing in its own way. 

Across the Atlantic, conspicuous giving has long been a key feature of philanthropy. It is in the UK as well, to a limited extent, with some donors choosing to loudly publicise their donations (often with the noble intention of encouraging others to follow their example). Many more, however, give privately and – increasingly – keep their generosity secret from not only the public but even those they support. This is most frequently done through a donor advised fund (DAF). 

DAFs are accounts owned and managed by a registered charity (such as CAF, with others including Prism, Stewardship and C. Hoare & Co’s Master Charitable Trust), into which the donor contributes. The money put in is considered an irrevocable donation, but the donor can instruct (or, technically, request) the DAF provider to make donations from these funds to charities of their choice. By routing the donation through a DAF, individuals can choose to give completely anonymously. Moreover, DAFs offer donors other significant benefits:  

• They can help donors structure and plan their giving efficiently. Donations paid into the DAF attract immediate personal tax relief, even if the donor may only decide where they ultimately wish to direct the funds in future tax years 
• The DAF eliminates the administration required to set up a trust or foundation, while delivering most of the same benefits. Some can also facilitate non-cash donations, such as shares or other assets to the fund – again while receiving personal tax relief at the time of donation 
• DAFs offer these benefits without any loss of control. Many DAFs even help with due diligence on the ultimate beneficiaries, and donors can still seek information and assurances on how donations are being used. Indeed, for those wishing to remain anonymous, a DAF makes this much easier. Consequently, donors can give privately but still receive measures of the success and impact of their giving

The last point is vital, because as philanthropy has risen to the forefront, many donors are not just more generous but also more strategic. Gifts have increased and so have donors’ desires for charities to show they’re making a difference. Those who donate in secret still want to be sure that their giving is helping those who need it most.