BY NAOMI CAINE
Christmas is a time for giving, but will you be giving to charity this year? The credit crunch has put the squeeze on family finances, which means many people are cutting their donations to good causes.
Almost a third of charities (30%) have recorded a slump in individual donations over the past 12 months, according to a recent poll by the Charities Aid Foundation (CAF) and the Association of Chief Executives of Voluntary Organisations (Acevo). They are not optimistic about the future, either - 88% expect charity income to drop over the next year.
It's not just cash-strapped consumers who are cancelling their direct debits. Corporate giving is under threat too, as profits slide. PricewaterhouseCoopers (PWC) recently conducted a survey of 362 UK charities along with the Charity Finance Directors' Group and the Institute of Fundraising - and the results make gloomy reading. Of the charities surveyed, 71% expect corporate donations to fall or remain static over the next year, with a fifth fearing they could lose at least 15% of their corporate income.
Scottish Opera has recently lost a number of its corporate sponsors in the housing and banking sectors. But general director Alex Reedijk remains upbeat. "We have a broad range of supporters including government, companies and private individuals, so we are not totally dependent on one source of income," he says.
A slump in income could not come at a worse time, though. Calls to debt charities, homeless organisations and employment services are rising as recession looms, and economic woes can also affect our mental health and relationships.
The CAF survey shows that 72% of charity chief executives have experienced an upturn in demand. Peter Kyle, deputy chief executive of Acevo, says: "Many charitable and voluntary organisations are being squeezed from both sides. They are experiencing a drop in donations at the same time as a surge in demand."
Charities are urging people to make the most of their donations by making them tax efficient. If you give money tax efficiently, you can increase your donations by about a third - at no extra cost. The Sunday Herald explains how.
GIFT AID
If you sign up for Gift Aid, the charity can reclaim the basic rate of tax on your donation. And the government will pay an extra 3p for every £1 you donate through Gift Aid until April 5, 2011.
Higher-rate taxpayers can also claim 20% tax relief on their donation - the higher rate of 40% minus the basic rate of 20% - and can either keep the money or give it to charity.
Gift Aid is for anyone, so long as you have paid more tax in the current financial year than the charity can reclaim on your donation. A charity will often ask you to fill in a Gift Aid declaration when you make a donation. If not, make sure you request the details. The declaration is straightforward, and can be done online or over the phone.
CHARITY ACCOUNT
A charity account with the Charities Aid Foundation (CAF) works just like a bank account, except all the money goes to charity. You get a charity card and a cheque book to make donating even simpler. Or you can set up standing orders from the account if you want to give money regularly.
You can open a charity account if you pay in a lump sum of £100, or at least £10 a month. And if you set up your account before December 31, CAF will give you £25 to donate to any registered charity of your choice. For more details see the CAF website on www.cafonline.org.uk or call 01732 520 050.
GIVE AS YOU EARN
Payroll giving is a great way to donate to your chosen charity because the money comes straight out of your gross pay. Your employer might already operate a payroll giving scheme. If not, contact your human resources department to discuss the options.
GIVING SHARES
If you give shares to charity you are eligible for income tax relief and exempt from capital gains tax on the donation.
You can contact a charity directly if you want to sell shares, or you can gift the shares to the CAF, which will then pass on the proceeds to your chosen charity. ShareGift, a charity set up in 1996 to aid share giving, will accept share donations of any amount, no matter how small. For more information, visit sharegift.org.uk or phone 0207 337 0501.
WEB DONATIONS
Fundraising websites such as justgiving.com make it easy to donate money to charity.
If you want to raise some cash for a particular charity, you simply create a fundraising page, which is a bit like an online sponsorship form. People can then make donations over the internet.
It's also tax efficient because the site automatically reclaims the Gift Aid.
CASE STUDY
Sara MacIntosh has raised more than £8500 for two charities that are close to her heart: Yorkhill Children's Foundation and the Meningitis Research Foundation.
MacIntosh, 34, from Blantyre in South Lanarkshire, says: "Last summer our baby boy, Fraser, was taken ill with the dreaded rash. He was only 13 months old and had contracted meningococcal septicaemia, which is often fatal."
Fraser was rushed to hospital in an ambulance and spent a week in intensive care and another two weeks in hospital. But he responded well to treatment and is now a thriving boy of nearly two-and-a-half.
MacIntosh has nothing but praise for the doctors and medical staff who helped to save her son's life, and decided to raise money for the hospital - and to fund research into the often-deadly disease.
She organised a fun fundraising evening, with lots of support from family, friends and local businesses, and also set up a web page on www.justgiving.com.
"It was a great success. It's so simple to donate online - and the charity benefits from Gift Aid."
Savings fears after latest interest rate cut
Savers will struggle to earn a decent return on their cash after the latest cut in the base rate from 3% to 2%. Adrian Coles, director-general of the Building Societies Association, says: "Savers will be disappointed at the news. Building societies that pass on both this base rate reduction and the last could halve the interest they pay to their investors in a very short period of time. A large proportion of the funds invested in building societies are held by those over the age of 55; building societies will wish to do what they can to protect pensioners from what will be, potentially, a very sharp reduction in their income."
Many savers are still reeling from last month's shock fall of 1.5 percentage points, which most of the banks and building societies have passed on in full.
Michelle Slade, an analyst at Moneyfacts, says: "The changes to savings rates after November's cut started to take effect from the beginning of December - and more than 90% of banks and building societies have passed on the cut in full."
Some have squeezed their savers even tighter: West Bromwich Building Society has chopped its savings rate by up to 2.5 percentage points; Leeds and Dunfermline building societies have axed rates for savers by up to two points; Barclays Bank and Alliance & Leicester have cut their savings rates by up to 1.75 points.
Slade says: "Savers need to be vigilant about their rates. If the base rate continues to fall, we could end up with a situation where the vast majority of accounts pay less than 1% interest."
So far, savers have done well during the credit crunch. Earlier this year, for instance, you could lock into a fixed-rate savings account at 7% or more. Now, the best-buy rates have fallen to less than 6%. You can, for example, fix for one year with Anglo Irish or ICICI bank for 5.75%.
The top variable rate deal is from Market Harborough Building Society. Its 30-day notice account pays interest of 5.8%. If you want easy access, the best buy is ICICI Bank's HiSave account at 5.5%. Of course, these rates will probably come down next month after the latest cut in the base rate.
The drop in savings rates means many savers will be unable to beat tax and inflation. If you are a basic-rate taxpayer, you need an account that pays at least 5.63%. Top-rate taxpayers must find an account that pays more than 7.47% - almost impossible in the current climate.
Banks and building societies are under increasing pressure to pass on the latest rate cut to borrowers. After last month's fall, 75% of mortgage lenders failed to pass the 1.5 point cut on in full to customers on their standard variable rate.
Slade says: "Mortgage rates for new customers are starting to come down, but nowhere near as quickly as they should. Fixed-rate mortgages are the worst hit, but many lenders also withdrew tracker mortgages straight after the last cut. Borrowers will be disappointed that they are not really feeling the full benefit."
Mortgage scheme 'not a release from debt'
Borrowers should not expect the government to bail them out of their mortgage debts, experts warned after the Treasury announced a Homeowner Mortgage Support Scheme last week.
The scheme will enable households that experience a "significant and temporary loss of income" during the economic downturn to defer a proportion of their mortgage interest payments for up to two years. The government will guarantee the deferred payments so the banks will not lose money if the borrower cannot repay the debt.
The Council of Mortgage Lenders has predicted that the number of repossessions could top 75,000 in 2009, nearly double its 2008 forecast of 45,000, so the scheme was broadly welcomed. The details have yet to be finalised, but the eight biggest lenders - HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays, RBS and HSBC - have so far pledged their support.
However, experts were keen to remind borrowers that the scheme does not release them from their debts.
Louise Cuming, head of mortgages at Moneysupermarket, says: "Homeowners need to be aware that the interest is deferred, not written off, and they will eventually have to repay it in full.
"The hope is that their situation will improve and they can then afford to get back on track with their payments. But if the recession proves to be prolonged, bloody and painful, there is the danger that when the time comes to repay, they may end up losing some of the equity from their homes."
There is also some concern that only a limited number of people will be eligible for the support. The government has also yet to win the support of some of the specialist lenders, who can be more ruthless at instigating repossession proceedings.
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