Christmas giving begins with your credit card

Christmas is a time for giving, and many charities concentrate their fundraising efforts around the yuletide period, with collections at carol concerts and on street corners. But if you are intending to give to those less fortunate than yourself, why not get the Inland Revenue to chip in a bit too?

It may seem too good to be true, but if you make the effort to give in a tax-efficient way, your donation can be boosted by 28 per cent. And if you are a higher-rate taxpayer, you can even get some money back for yourself too.

While dropping small change into a collector's box on a street corner or in a door-to-door collection is a generous act in itself, a much better idea is to take a few minutes to give the collector your name and address and make the donation under Gift Aid.

As long as you are a taxpayer, the charity can collect from the Inland Revenue the basic-rate tax you would have paid on the sum you have donated. So if you give £10 to the charity, the donation is boosted by another £2.82 by the taxman (£12.82 - 22% = £10). And it gets better. If you are a higher-rate taxpayer and declare the sum that you have given on your tax return as gift made under Gift Aid, you yourself will get back - in terms of a reduction in your tax bill - a further £2.31. So your £10 donation is not only boosted to £12.82 by the time it reaches the charity, but it has cost you only £7.69.

However, if as a higher-rate taxpayer you want to donate the full £10, as long as the charity is in a designated list specified by the Inland Revenue, you can note on your tax form that you want the Inland Revenue to forward the rebate (or rebate of tax due for other reasons) directly to the charity - and you can even claim tax relief on the amount of the rebate you have just passed on the following year.

In order to give under Gift Aid, you must pay at least some tax, which can be income tax or capital gains tax. If you pay tax only at the lower rate of 10 per cent, the charity can still reclaim tax at the standard rate of 22 per cent as long as you have paid enough tax in total at least to equal the amount of your donation during the tax year in which you make the gift.

Subscriptions to charitable organisations such as the National Trust, the Youth Hostels Association or the Royal Society for the Protection of Birds are popular Christmas presents, and you can get tax relief on many of these subscriptions too. Unfortunately you can't get tax relief if the value of member benefits, such as free entry to events and member publications, exceeds a certain amount. This is generally 25 per cent of the value of the subscription paid, but there are exceptions for heritage and wildlife charities including the National Trust and London Zoo, so make sure that if you sign up for these you do so under Gift Aid as well as using Gift Aid for straightforward memberships which do not confer benefits in kind.

Christmas is also a time for shopping, and a painless way to give to charity is to use a charity credit card. The charity receives a one-off fee when you take it out, and then a percentage of what you spend on the card.

Nationwide Comic Relief Card gives £5.65 to Comic Relief the first time that you use your card, and then 0.5 per cent of the value of all your transactions. HBOS offers cards for Mencap, Cancer Research and Mencap and donates £20 to the charity, plus 0.25 per cent of the value of your spend.

Cards issued by Beneficial Bank, such as the RSPCA card, give £15 to the charity and then 0.25 per cent of your spend. Breakthrough Breast Cancer receives £5 from issuer MBNA for each online application, plus a further £2 for every year you continue to use your card, plus 0.25 per cent of the value of your purchases. HSBC's Artscard gives £10 to the arts organisation of your choice from a list that includes the Royal Shakespeare Company and the Tate Gallery - and 25p for every £100 you spend.

At an average of 0.25 per cent of your spend, the donation rates may not be as good as those you could get from a cashback card such as American Express or Morgan Stanley - which you could use and then give the cashback to charity under Gift Aid. And if you don't repay your balance each month, you may be able to get a lower interest rate credit card elsewhere. However a charity card is a simple way of giving as you spend. A list of charity cards can be found on www.find.co.uk

Another excellent, and tax-efficient, way to give to charity is Give As You Earn. If you work for a firm that has signed up for the scheme, the money is taken from your salary before tax is deducted. So a £10 a month donation to the charity of your choice is costing you £7.80 of your take-home pay if you pay basic-rate tax, while higher-rate taxpayers are giving up just £6 of their salary. If your firm doesn't offer GAYE, ask it to start.

If you give to charity regularly, you could open an account with the Charities Aid Foundation. You get a 'chequebook' and CharityCard 'debit card' that you use exclusively on your charity account. The amount you pay into your account is automatically boosted by 28 per cent under Gift Aid, less a small handling fee, and you then write out 'cheques' to the charities of your choice, which receive the money from your account at face value (with no more tax to reclaim from the Inland Revenue).

Donating shares is also a good way to give to charity. You can donate shares directly to the charity and claim tax relief on the value of the shares, as well as any broker's fees and stamp duty. Giving shares to charity is a particularly cost-effective means of getting rid of odd shares that would cost more in stamp duty and selling commission than the proceeds that would be raised by selling them.

Often people acquire a small number of shares via an inheritance where a larger holding is divided up, or they mislay a certificate that they have acquired under a scrip, or they mistime the selling of shares when they have opted to take dividend reinvestment instead of cash, and they then get left with just a handful of shares after selling the bulk their holding.

Sharegift can help. It bundles together shares and sells them and then passes on the proceeds to one or more of around 300 charities. This month Sharegift is appealing for shareholders in Centrica, the company that owns British Gas, to pass on the cheques that they will receive as part of the share consoli dation that resulted from the sale of the AA earlier this year. The sums involved are tiny - between 23p and £2.15 - but Sharegift says that if all the 600,000 shareholders who are due to receive cheques handed them over, they could raise £1 million for good causes. Centrica is enclosing pre-paid envelopes with the cheques that accompany the new share certificates so that shareholders can return the cheques to Lloyds TSB Registrars, who will deal with them on behalf of Centrica and Sharegift.

Finally, give to charity in your will. Donations to charity are free of inheritance tax and many charities will help you make your will.

Nearly 130 charities of all sizes and types, including National Children's Home, Oxfam, the Royal National Institute for the Blind, Leukaemia Care and the RSPCA have joined forces to rund the Remember A Charity scheme. The scheme has produced a free guide to making a will, telling you the steps you need to take and how to leave a gift to your favourite cause.

This month also sees the return of Will Aid, the biennial campaign which has raised £4 million for charity since its launch in 1988. Under the scheme solicitors across the country give their will-writing services free in return for their clients making a donation to charity. The amount of the donation is up to the individual but Will Aid suggests £65 for a straightforward will, £95 for 'mirror wills' for a couple, and £35 for a codicil to make an addition to an existing will. Taxpayers can boost their donation with Gift Aid.