Just because Christmas has passed, it doesn’t mean the season of giving has to end.
Indeed, with Random Acts of Kindness Day just around the corner on 17 February, now is the perfect time to explore ways to use your wealth to make a positive change in the year ahead.
Research published on PsychNet suggests that spending money on others leads to greater happiness than spending money on yourself. So, giving selflessly not only brings joy and support to others but may also leave you with a sense of fulfilment.
Additionally, as an extra incentive, giving gifts can come with financial benefits, making your generosity even more rewarding.
So, with Random Acts of Kindness Day fast approaching, here are three lovely ways to use your wealth for good in 2025.
1. Donate to charity and support meaningful causes
Donating to charity is one of the simplest and most effective ways to use your wealth to support good causes.
Not only is it straightforward, but it’s also incredibly popular. According to the Charities Aid Foundation, Brits donated £13.9 billion to charity in 2023.
Investors’ Chronicle reports that around £3.9 billion of that sum was left to charities in wills. Indeed, Cancer Research UK, one of the country’s largest charities, received over a third of its £719 million income from legacies in the year ending March 2023, with one generous soul leaving an incredible £44 million.
Charities rely heavily on donations, and by supporting them, you can address issues close to your heart. And, did you know that charitable giving can also come with tax benefits?
For example, donating through Gift Aid allows registered charities and community amateur sports clubs to claim back the 20% basic rate of Income Tax on your donation.
This means that for every £1 you give, the charity receives an additional 25p, maximising the efficiency of your contribution at no extra cost to you.
Furthermore, if you’re a higher- or additional-rate taxpayer, there are further benefits as you can claim back the difference between your highest Income Tax rate and the basic 20% rate. This means you could claim 20% or 25% tax relief on your donation depending on your marginal rate.
Moreover, donations you leave to registered charities in your will are also exempt from Inheritance Tax (IHT), as they’re not considered part of your taxable estate.
Additionally, if you leave at least 10% of your net estate to charity, the IHT rate on your remaining estate reduces from 40% to 36%. So, leaving a legacy to charity in your will can benefit both the causes you care about and your beneficiaries.
2. Give gifts to your loved ones to help them achieve key milestones
Giving gifts to your loved ones can help them achieve key milestones, such as buying their first home or celebrating their wedding day.
In addition to experiencing the joy of helping your family and friends during your lifetime, these gifts can also reduce the IHT liability on your estate when you pass away.
For the 2024/25 tax year, you can give up to £3,000 a year, which doesn’t count toward your taxable estate and is exempt from IHT if you pass away. This is known as your “annual exemption”.
If you didn’t use your exemption in the previous tax year, you can carry it forward, allowing you to gift up to £6,000 tax-free.
You can also give wedding gifts of up to £5,000 depending on your relationship with the recipient, and individual gifts of up to £250 to as many people as you like, provided they haven’t already benefited from your annual exemption.
If you gift larger sums beyond these allowances and exemptions, they may be considered potentially exempt transfers (PETs).
PETs will fall outside your estate for IHT purposes if you survive for at least seven years after making them. However, if you pass away within seven years, the gift may still be subject to IHT. Depending on the circumstances, this may be at a tapered rate determined by the amount of time passed since you gave the gift.
So, by using gifting allowances and exemptions, you can provide meaningful support to your loved ones while also reducing the size of your taxable estate. This could offer a further boost to your beneficiaries when you pass away.
3. Invest in innovation to help build a better world
Environmental, social, and governance (ESG) investing prioritises companies that apply sustainable and ethical practices. It can also include businesses developing innovative solutions to some of the world’s most critical problems.
With pressing environmental challenges on the horizon, there has been an uptick in ESG investing in recent years.
ESG Today reports the market for environmental and climate solutions, often referred to as the “green economy,” has grown significantly faster than the broader market in both revenue and valuation.
Over the last 10 years, the green economy has had a compound annual growth rate of 13.8% compared with 8.3% for global equity markets.
If treated as a standalone sector, the green economy has outperformed all industries except technology over the past decade.
This demonstrates both the increasing demand for sustainable solutions and the financial viability of investing in this rapidly growing sector.
So, investing in ESG could be an important and rewarding way to use your wealth for good in the year ahead.
Get in touch
A financial planner can help you to efficiently use your wealth meaningfully in the upcoming year. They can work with you to make informed decisions that align with your values, principles, and financial goals.
To speak to a financial planner, get in touch.
Email admin@stonegatewealth.co.uk or call us on 01785 876222.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
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