It's a time for giving, so let the taxman top up your donations to charity

Volunteers rattling collection tins are as ubiquitous as tinsel and drunken partygoers at this time of year. But if you are going to be charitable at Christmas, it's worth planning carefully how you do this before tucking a fiver into the next tin that comes your way.

Nearly £6.8bn was given to charity last year but more than £254m was lost because we don't make the best use of tax- efficient ways of donating, according to research from IFA Promotion, which promotes the benefits of independent financial advice.

"Tax efficiency is easy to arrange and you don't need to donate large amounts," says David Elms, chief executive of IFA Promotion.

The most effective ways of donating are through Cov- enant, Gift Aid or Payroll Giving. With a Covenant, you have to make a four-year pledge to a charity for a set amount. If you want less of a commitment, Gift Aid lets you make a one-off donation.

The Payroll Giving scheme is operated by employers, although it is not available in every workplace. It lets employees donate a set amount of cash on a regular basis, which is deducted from their pay packet. Until April, the Inland Revenue will contribute a further 10 per cent on each donation. So a £10 gift to charity costs a basic-rate taxpayer only £7.80; and with the supplement, the charity ends up getting £11.

If you don't have time to set up a tax-efficient way of giving, dig out those charity credit cards hiding in your purse. During the festive period, Nationwide building society is doubling the donation it makes on a customer's behalf on its Comic Relief credit card to 1 per cent of the value of all purchases.

Charity Christmas cards are a popular way of donating but the actual amount that reaches the charity's coffers is much smaller than many people realise. Cards bought from big high-street retailers are the worst offenders, as just a few pence is passed on to the charity for each one sold.

The best way to ensure the good cause benefits is to buy cards in charity shops or via a charity's catalogue. As much as 80 per cent of what you pay goes towards the charity if you buy your cards direct, compared with the typical 10p in every £1 that is donated by retailers.

Also beware of professional fundraisers who stop you in the street to collect on behalf of good causes. Ask them how much of the donation actually goes to the charity; if they are vague or refuse to tell you, leave well alone. It's far better to make a donation directly to the charity as it's the only way of ensuring that the full amount is passed on.

And if you are in doubt about a charity's status, call the Charity Commission's help-line on 0870 333 0123 or visit its website at www.charity-commission.gov.uk.