Donating Shares to Charity: Tax Relief on Land, Property and Investments

Donating shares to charity can provide income tax relief while removing a potential capital gains tax charge. Similar relief may apply when an individual gives qualifying land or buildings to an eligible charity.

The tax result depends on the asset, its market value, and how the transaction is completed. Selling an investment before giving the proceeds away is not the same as transferring the investment directly to the charity. Companies may also receive corporation tax relief when donating qualifying assets. The legal ownership, valuation, and transaction sequence should therefore be reviewed before any sale or transfer takes place.

Guidance on Claiming Tax Relief on Charitable Donations

• Individuals may receive income tax relief on qualifying shares, securities, land and buildings.
• Direct gifts of assets to charity are normally exempt from capital gains tax.
• Relief can also apply when assets are sold to a charity below market value.
• Companies may deduct qualifying charitable asset gifts from taxable profits.
• The charity must formally accept the asset.
• Valuations, transfer documents, and charity correspondence should be retained.

How Donating Shares to Charity Reduces Tax

An individual may claim relief against taxable income when qualifying investments are given directly to charity. The relief is separate from Gift Aid, which generally applies to cash donations.

A direct transfer may provide two tax advantages:

• an income tax deduction based on the qualifying value
• an exemption from capital gains tax on the asset transferred

The value of the income tax saving depends on the donor’s taxable income and marginal rate. The donation does not produce a standard refund for every taxpayer.

The rules can form part of wider tax relief on charitable donations, particularly where an investor holds assets that have risen substantially in value.

Which Shares and Investments Qualify?

Income tax relief is restricted to specified investments. Qualifying assets include:

• shares or securities listed on a recognised stock exchange
• qualifying shares traded on designated UK markets, including AIM
• units in authorised unit trusts
• shares in open-ended investment companies
• interests in certain qualifying overseas collective investment schemes

Not every privately held company investment qualifies. The legal status and market on which the investment is traded should be checked before relying on the relief.

A charity that cannot economically process a small shareholding may suggest transferring it through a specialist share‑giving charity, provided the structure still results in a qualifying gift to a UK charity for tax purposes.

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Income Tax Relief on Donated Assets

For individuals, the qualifying deduction is normally based on the asset’s market value at the date of the gift.

The calculation may be adjusted for:

• legal, broker or other incidental disposal costs
• money paid by the charity
• liabilities transferred with the asset
• financial benefits received by the donor

The final qualifying amount is deducted when calculating taxable income for the tax year of the gift.

Self-assessment taxpayers normally claim the relief through the charitable giving section of their tax return. Individuals who do not complete a tax return can contact HMRC about a refund or tax code adjustment, following HMRC’s guidance on claiming tax relief for charitable gifts.

Capital Gains Tax on Charitable Gifts

A person does not normally pay capital gains tax when giving land, property or qualifying shares directly to charity.

The result can differ if the charity pays for the asset. Where an asset is sold for more than its original cost but below market value, the gain is generally calculated using the amount paid by the charity rather than the unrestricted market value.

This distinction matters. An investor who sells shares personally and later donates the cash has already made a disposal. Any taxable gain arises before the cash donation is completed.

The charity should accept the shares before a sale if the transaction is intended to qualify as an asset donation.

How to Donate Property to Charity

An individual may claim income tax relief for a qualifying gift of UK freehold or leasehold land. Relief may also apply when the property is sold to a charity for less than market value.

The donor must normally transfer their entire beneficial interest in the property they are donating. Where land is jointly owned, relief can still be available for the share that is given, but each co‑owner can only claim relief on their own interest.

Before deciding to donate property to charity, the parties should consider:

• whether the charity can legally and practically accept the property
• whether a mortgage or other liability is attached
• the property’s supported market value
• legal transfer costs
• whether all beneficial owners agree
• the effect of any payment made by the charity

A charity certificate and properly completed legal documents may be required to support the Income Tax claim.

Corporation Tax Relief for Company Donations

A limited company can usually deduct the qualifying value of donated land, property or shares in another company from its taxable profits.

The company should not normally recognise a taxable capital gain on a direct qualifying gift. However, a company cannot claim this form of relief for donating shares in itself.

The deduction cannot create or increase a trading loss, because it is relieved against total profits as a charge on income, not as a trading deduction. Companies should retain records showing the valuation, transfer and the charity’s acceptance. HMRC explains the requirements in its guidance on Corporation Tax when a limited company gives land, property or shares to charity.

Common Tax Risks When Donating Assets

HMRC may question a claim where:

• The shares or securities do not qualify
• The valuation is unsupported
• The charity did not formally accept the asset
• The donor sold the asset before making the gift
• Transferred liabilities were ignored
• Joint ownership requirements were not met
• The tax return contains the gross value rather than the adjusted qualifying amount

A poorly structured transaction can reduce or remove the intended relief. It may also create a Capital Gains Tax liability that could have been avoided through a direct transfer.

Records Donors and Companies Should Keep

HMRC requires evidence showing that the gift or qualifying sale took place and that the charity accepted it.

Relevant records include:

• stock transfer forms for shares,
• land transfer documents (and any charity certificate),
• professional valuations or other evidence of market value,
• correspondence with the charity, including any written request to sell on its behalf,
• evidence of incidental costs,
• documents showing any payment or benefit received,
• written instructions where the charity asks the donor to sell on its behalf.

Individuals will normally need to retain records for at least 22 months after the end of the relevant tax year if they file on time but should keep them until the end of the enquiry window (usually 5 years and 10 months after the end of the tax year) and longer in some circumstances. Companies generally retain accounting and tax records for at least six years from the end of the accounting period.

Tax Planning Support From Apex Accountants

Apex Accountants can review the proposed transfer before the donor disposes of the asset.

Our tax planning services can include:

• confirming whether investments are likely to qualify
• reviewing income tax and capital gains tax consequences
• calculating the adjusted deductible amount
• assessing corporation tax relief for company donations
• checking valuation and record-keeping requirements
• preparing self-assessment or company tax return disclosures
• coordinating with solicitors, valuers and the receiving charity

Claim the tax relief you’re entitled to on charitable donations. Book a consultation with our tax experts for clear, practical advice on donating land, property, or shares to charity.

Conclusion

Donating shares to charity may reduce taxable income and remove capital gains tax on qualifying investments. Similar rules cover qualifying gifts and below-market sales of UK land and buildings.

The relief is valuable, but it is not automatic. The asset must qualify, the charity must accept it and the transaction must be supported by appropriate records. Selling the asset before completing the gift can materially change the tax result.

To review a planned charitable asset transfer, contact Apex Accountants or book a free consultation.

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Call Anytime 0203 883 4777

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Frequently Asked Questions

Can I Donate Shares Without Paying Capital Gains Tax?

A direct gift of qualifying shares to an eligible charity is normally exempt from Capital Gains Tax. The transfer and charity acceptance must be properly documented.

Is It Better to Donate Shares or Sell Them First?

A direct donation may provide both Income Tax and Capital Gains Tax relief. Selling first can create a taxable disposal before the cash is donated.

Which Shares Qualify for Income Tax Relief?

Qualifying investments can include listed shares, certain AIM-traded shares, authorised unit trusts, open-ended investment companies and specified overseas collective investments.

Can I Give a Mortgaged Property to Charity?

A charity may accept mortgaged property, but lender consent may be needed. The transferred liability can also reduce the qualifying Income Tax deduction.

How Is the Value of a Donated Asset Calculated?

The calculation normally starts with market value at the date of the gift. It is adjusted for qualifying costs, payments, benefits and transferred liabilities.

Can a Limited Company Claim Relief on Donated Shares?

A company may claim Corporation Tax relief when donating qualifying shares held in another company. It cannot claim the relief for donating its own shares.

How Do I Claim the Relief From HMRC?

Self-assessment taxpayers usually claim through the charitable giving section of their return. Companies include qualifying deductions when calculating taxable profits.