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It is estimated that individuals donate around £9.5 billion to charity annually, around one-third of fundraising charities’ income. (For detailed information on the top fundraising charities, and a summary of trends in giving see Charity Market Monitor published by CaritasData).
Cash giving is spontaneous, immediately rewarding, and the most popular way of individual giving. Almost half (48 per cent) of individual donors make cash gifts in pubs, shops, churches and club collections, face-to-face fundraising, tins in street collections, in envelopes distributed door-to-door, sponsorships, fundraising events from jumble sales to gala dinners, and one-off initiatives at special occasions.
For example each year the Musicians’ Benevolent Fund successfully solicits generous donations from the audience coming out of the summer ‘Prom’ concerts, warmed-up to the cause.
But although cash gifts are the single most popular way of giving, they only yield 18 per cent of the value of donations.
The largest gifts are made through non-cash methods such as cheques, direct debits and cards. Sometimes called ‘planned giving’, such approaches involve more considered giving, and usually bigger donations.
Cheques are still the most popular non-cash method. But the fastest-growing non-cash approach is direct debit. This is now used by 29 per cent of donors, and yielding one-quarter of donations value. This is the holy grail of individual giving - regular, committed and longer-term. Though a note of caution is needed. Research suggests direct debits signed up through face-to-face-fundraising have a high default rate, often within a year of commitment.
Other ways of attracting non-cash gifts are through appeal letters, media campaigns, and telephone fundraising.
One big bonus of these approaches is that they pave the route to tax-effective giving, because they involve the donor in providing name and address details.
Only individual gifts to registered charities, or organisations recognised as tax-exempt by HM Revenue and Customs (HMRC) because of their charitable nature (such as Boy Scouts groups), are eligible for the charitable tax-reliefs. The UK has a very generous system of tax-reliefs for individual giving.
The most popular approach is Gift Aid, which accounts for 90 per cent of tax-effective giving. Gifts made through Gift Aid mean that the charity can claim upto 28p in the pound back from HMRC on every gift made by a UK tax-payer, a substantial boost. UK charities receive an £850 million pound bonus on individual giving through reclaiming tax.
To claim tax back through Gift Aid, charities need a donor to provide basic contact details, and to sign a declaration that he/she is a tax-payer and wants the charity to claim back the tax. For major national TV fundraising campaigns like Comic Relief, this can be done over the telephone, as long as donor details are captured and later followed up. Higher-rate-tax payers get a personal income tax-relief, in addition to the basic rate tax paid back to charities.
An alternative way for people in work and on PAYE to give regularly and tax-effectively is ‘payroll giving’. Donations to charity are automatically deducted from pay before tax is paid. So, unlike Gift Aid, the tax-relief goes directly to the donor. Some people think this way of giving is a no-brainer, and yet only 3 per cent of the workforce gives in this way.
Payroll giving takes a little setting-up, as employers need to sign up to the scheme, and a payroll giving agency is needed to distribute donations. But once it is going, it provides for regular long-term tax-effective giving.
Individuals give around £350 million of shares and property to charities each year, attracting personal income tax relief on the full current market value of such gifts. And charitable legacies are exempt from Inheritance Tax.
So individuals have many incentives to give in tax-effective ways, and charities have much to gain from promoting them. Which is why it’s a mystery that still only one-third of individual giving is tax-effective.
Almost all surveys of giving agree on the basic characteristics of people who give most often and most generously. They are middle-class, middle-aged, and living in South-East England. More women give than men, especially if they have children. Most charities target this population, often distinguishing it further by information on characteristics such as suburban or city-dweller, broadsheet or tabloid reader, right or left-leaning politically, and consumer and lifestyle patterns.
Charities have more sophisticated knowledge of their donors then ever, but this can lead to a focus on existing donors and their like, rather than on exploring new markets. Some of the new online fundraising works through personalised social networking websites, rather than traditional donor segments.
People in the UK give around 1 per cent of their income to charity. But different surveys have found wide variations in average amounts. For example:
How much people give - average monthly giving is most recently estimated at:
How many people give – the monthly proportion who give is estimated at:
Such variations can largely be explained by differences in survey methodology, but a final full understanding of individual giving still remains just beyond reach.
From doing a street collection to adding a make a donation button to your website, there are many ways to ask individuals for money. Some organisations use a range of methods, others just one or two. It is a good idea to evaluate the time/money you spend on each method to check your effectiveness.
Clearing houses can be a good way of raising money for specific projects and finding new supporters. For example, GlobalGivingUK lists projects by topic and region. They take percentage of donations and will help you to promote your cause.
For some trend information on the percentage of donors giving by different fundraising methods (for example, street collections vs house to house vs raffles) and the total value of what they give, see page 239 of Charity Marketing, 2005, by Ian Bruce published by ICSA.
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