Five ways to give to charity

published 19 December 2008

Recessions are tough on everyone, but they're particularly bad news for charities. A recent survey of 362 charities by the Charities Commission shows that as times get harder, 72% are finding demand for their services rising, particularly those involved in mental illness and homelessness. Yet one third also reported increased cancellation rates for direct debits, as consumers try to cut costs where they can. Meanwhile, falling house prices and slow sales mean that the value of bequests which account for 25% of the revenue received by a typical charity is tumbling too. And a full 70% expect corporate donations either to fall or stay static over the next 12 months. Chuck in the diversion of an estimated £620m of National Lottery funding to the 2012 Olympics, and the sector could be facing what The Independent's Julien Knight calls a £2.3bn "black hole".

The good news is that you don't necessarily have to spend money to help charities there are plenty of other ways to help. And if you do feel you can contribute something this Christmas, there are ways to make sure your gift goes that much further, which will be more important than ever in 2009.

Charities are businesses and need steady cash flow to fund ongoing projects. So while a special one-off donation at Christmas is always gratefully received, splitting it into smaller monthly contributions is actually more useful, says Intelligentgiving.com. A monthly direct debit is also far easier for you to budget for, meaning you don't have to cobble together the cash at what is already an expensive time of the year.

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There are many ways to make charitable giving tax-efficient. Gift Aid allows UK taxpayers to reclaim basic (22%) or higher-rate (40%) tax on the gift, depending on your tax status. All you need to do is give your name, address and state that you're a British taxpayer on a simple form, or even over the phone, direct to the charity. It's worth it as Moneysavingexpert.com notes, with tax relief a £144 donation turns into £240 for a higher-rate taxpayer.

Even simpler is an employer's Payroll Giving scheme. This enables your firm to make donations on your behalf straight to a charity, including the relevant tax credit. If you're not part of such a scheme, there's also the Charities Aid Foundation Charity Account. You pop money in via Gift Aid (or via a Payroll Giving scheme if you are able to join one) and the relevant tax credit is automatically added to your account. Later, when you're feeling generous, you write a cheque to your chosen charity.

If cash is tight this year there are plenty of other useful things you can give your time is one of them. That doesn't have to mean running a car boot sale or helping in a charity shop. For other projects, see intelligentgiving.com, or networkforgood.org. Or why not have a festive clear out? Many charities now accept a vast range of old kit, from clothes to mobile phones (take out the SIM card first), computers, iPods, bikes and old furniture. Specsavers and Vision Express will even accept old pairs of glasses in reasonable condition in their stores and pass them onto Vision Aid Overseas, who process 90% of Britain's second-hand glasses for charitable purposes. Finally, if it's old shares you want to dump, but fear that the trading costs will exceed what they'd fetch, try giving them away via Sharegift.org.uk. That way you get full income-tax relief on the gift and no capital-gains tax headache.

Unfortunately the subprime crisis has given most lending a bad name. That's a pity as sites such as Kiva.org offer the chance to make life-changing loans direct to entrepreneurs in developing countries. You can start from as little as $25, with the aim of giving someone overseas the seed capital they need to get started. Few borrowers default, so the only cost to you is lost interest over the term of the loan.

With some of the larger charities, giving can feel a bit impersonal and you may never know quite what your money was used for. This doesn't worry many donors to Oxfam, for example, who readily admit that contributions are pooled to pay for some of their larger infrastructure programmes. And arguably, as the people on the ground, they should have a better understanding of what the communities they are trying to help need than individuals do we can't all donate goats, for example.

Many of us buy Christmas cards sold on the basis that some of the price will go to charity. But the Charities Advisory Trust reckons that with four out of five cards, less than 10% of the retail price actually goes to charity and there's no tax relief either. But there are more effective ways to buy charity Christmas cards. Try www.cardsforcharity.co.uk, which sells a variety of cards with at least 79p in the pound going to the charity in question. Charities represented on the site include the British Heart Foundation, Barnardos and the NSPCC.

Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.