Giving to charity can be a less taxing issue

The Gift Aid Scheme is the easiest way to increase the value of your donation since the Inland Revenue will add an extra 28 per cent to your donation if you are a UK taxpayer.

Usually the top-up by the taxman is 25p to every one pound contributed but until spring next year, the amount has been increased to 28p. As an even greater incentive, higher rate taxpayers who donate to charity receive tax relief at 40 per cent.

Every year the Inland Revenue gives away some 1bn through the scheme but thousands of donors do not take advantage of this facility to the frustration of charities.

The route is easy. There is no standard form but most charities will provide one if required (such as for higher rate taxpayers). The charity needs your full name, address and a declaration that you wish the money to be regarded as 'gift aid'.

You don't need to repeat this declaration as the initial one can state that any future donations should be treated the same way.

It's also possible to backdate your gift aid declaration which so many churches do not seem to realise. If past donations have not been on a gift aid basis, simply ask the Inland Revenue to rebate the tax taken on donations made in the last six years.

Payroll giving is a second efficient way to support a charity. Agree to pay a regular sum – monthly or quarterly perhaps – to a charity of your choice and your employer deducts the amount before any tax is taken.

In many cases, employers will match staff contributions which is an added bonus. The charity will usually receive less through this method than through the gift aid route.

Duncan Bannatyne, a noted member of BBC Two's Dragons' Den, fronts the Geared for Giving campaign, which seeks to persuade companies to establish payroll giving for their staff. The take-up to date – only three per cent – has been disappointing.

After two years of work by Mr Bannatyne, a million more employees have taken up the initiative with 1.2m donated to charity as a result. He hopes to increase this to 1bn within five years. It is up to each employee to nominate their good cause which might explain why charities have not pushed as hard as might have been expected.

Of course, check that your nominated charity has been granted

charitable status by the Charity Commission. Earlier this month,

druidry was recognised under the 2006 Charities Act. Not all bodies that consider themselves religions succeed in securing such status. In 1999 the Commission ruled against the 'Church of Scientology'.

On the high street, there are many charity workers who try to persuade a direct debit donation to be started. Termed 'chuggers' (charity muggers) by some, they are rarely volunteers but a paid informal force, often receiving 10 plus an hour via an agency with some enjoying commission on top. A more effective way to give is to give directly to the charity of your choice via its website.

According to Intelligent Giving, which analyses the accounts of 1,300 charities, cancer charities spend 25.7 per cent on average on fundraising but the proportion falls to 12.9 per cent for religious charities. Be aware that online charity networks may take a commission. The best known site, Just Giving, imposes a 15 monthly fee to each charity and deducts five per cent from each donation. By comparison, virginmoneygiving.com charges 100 registration and then two per cent commission on donations.

A charitable trust is a vehicle to support your specified causes during your lifetime and after death. The trust must be for the 'public benefit' as set out by the Charity Commission. The Inland Revenue lets the trust reclaim tax on donations made. There are two further tax advantages: no tax on investment income and no inheritance tax.

Some solicitors suggest a charitable trust cannot be started without 100,000 but this is not correct. Whilst the Charity Commission will not automatically register a trust with an annual income below 5,000, unregistered ones can obtain the same tax allowances by applying to HM Revenue & Customs.

Some trusts are funded annually on an ongoing basis and never started with a substantial endowment. A 40 per cent taxpayer contributing 12,000 annually net for five years could set up their own charitable trust worth 100,000.

Those who establish trusts 'in perpetuity' can accept a proportion of the estate of the founders. When the trustees choose, such trusts can be wound up provided any remaining money is gifted to promote the trust's aims.

For donors with a minimum 10,000, the Charities Aid Foundation offers several trusts. For an annual fee, it can arrange for a trustee, investment manager and solicitor to act with the donor.

ShareGift is "a fantastic idea well ahead of its time", according to Sir Stuart Rose, the retiring chairman of Marks & Spencer. It allows shares – both of UK and foreign companies – that are no longer required to be donated.

Many investors find they hold small quantities of shares from demutualised banks and building societies and from utilities that have left the nationalised state sector. ShareGift bundles the shares together to make a trade efficient and ensures the net proceeds go to charity, raising over 1m annually.

Stockbrokers Killik & Co execute the sales on a commission-free basis.

There are two tax benefits for the donor: you can claim income tax relief and there is no capital gains tax liability. Details from 020 7930 3737.

It is also possible to support a charity through your spending!

Several credit card providers – notably Co-operative Financial Services and MBNA Europe Bank – offer schemes where they donate a sum both when a specific card is applied for and when it is used for the first time. They usually also pay a percentage of the turnover on the card.

Credit cards with that extra touch

Both Malcolm Smith, a 60-year-old Leeds-based management consultant, and his wife, Isobel, have held Oxfam credit cards for over 20 years.

The card is issued by the Co-operative Bank which pays Oxfam 15 for every account opened and a further 2.50 if it is used within six months.

A further 25p is donated for every 100 spent on the card.

Malcolm, who banks with the Co-op, says Oxfam was one of the first to introduce a donation card.

"It's a very painless way to make a useful contribution," he says, adding that when they offer the card, it often gives a chance to comment on their choice of charity.

Among the donation credit cards offered by the Co-operative Bank and Britannia are Amnesty, CAFOD, Christian Aid, Help the Hospices, RSPB, Save the Children, Shelter and the Woodland Trust. In the case of the RSPB and Shelter, the initial donation is 18 and 20 respectively.

Malcolm enjoys singing choral music and country walking.