Giving money through Gift Aid
How Gift Aid works
If you pay UK tax on your income or gains (eg through PAYE, by Self Assessment (SA) or at source on your bank/building society interest) and then make a Gift Aid donation, UK charities can claim back basic rate tax relating to that donation directly from HM Revenue & Customs (HMRC).
As a result any gift you make, as a Gift Aid donation, is worth more to the charity than the amount you actually pay.
Example
- If you pay tax at the basic rate of 20%, you actually have to earn £12.50 to receive £10 in your pay packet. (£12.50 x 20% = £2.50 tax).
- Because charities can reclaim that basic rate tax a Gift Aid donation of £10 it is worth £12.50 to your chosen charity.
For Gift Aid donations made from 6 April 2008 to 5 April 2011, HMRC will also be operating transitional provisions, paying the charity a Government supplement of 3p on every £1 donated. This means that your £1 Gift Aid donation is worth a total of £1.28 to the charity. Find out more about transitional relief.
Special rules also mean that if you and your family visit certain charity
properties you can choose to make a Gift Aid donation rather than pay the
normal admission price. For Gift Aid to apply on your donation you must
choose to pay either 10 per cent more than the usual cost of day admission
or make a donation that gives you an annual right of admission.
You choose to |
Cost to you |
Charity gets |
|---|---|---|
Pay for day admission |
£10 |
£10 |
Pay day admission rate plus 10% as a Gift Aid donation |
£11 |
£13.75 |
Pay for a right of annual admission as a Gift Aid donation |
£50 |
£62.50 |
Advantages of Gift Aid for you
- Your gift is worth more to the charity without you paying any more.
- If you are 65 or older, your gross Gift Aid donations are deducted from your taxable income when calculating age related allowances, this may increase your age related allowances.
- You can include Gift Aid donations on your Tax Credit application; because the donations reduce your taxable income you may be awarded more tax credits.
- If you pay higher rate tax you can claim back the difference between the basic rate of tax and the higher rate on all gross Gift Aid donations made each tax year.
Example
If you gift £10 to charity you effectively make a gross gift of £12.50 (£10 given plus the tax already paid and claimed by the charity).
But, if you pay tax at the higher rate (40%) you can also claim the difference between the tax at higher rate and basic rate on your gross gift.
ie (40% – 20%) = 20% x £12.50 = £2.50
Gift Aid restrictions
- You can’t use Gift Aid for payments made to a charity in return for goods or services (eg concert tickets, books etc). Gift Aid only applies to donations of money.
- As a thank you for your gift a charity may offer you a something in return (eg a pen or a teddy). If the value of such benefits is above certain limits it may mean that your donation doesn’t qualify for Gift Aid.
How to make a Gift Aid donation
In order for your gift to qualify as a Gift Aid donation you must make a declaration to the charity that:
- you want your gift treated as a Gift Aid donation
- you have paid sufficient UK tax for the year your donation is made to cover the basic rate tax the charity will reclaim
Your declaration must include your full name and home address (or at very least your postcode and house number).
Your chosen charity can usually supply you with a form on which to make this declaration, or they may read you a statement and ask you to confirm the details that they are recording on your behalf. (eg in a telephone appeal).
You’ll need to make a separate declaration for each charity but one declaration can usually cover all gifts you make to that charity now and in the future.
Record keeping
You should keep a record of the total amount of your Gift Aid donations for each tax year (a tax year runs from 6 April to 5 April).
Reporting and claiming
- If you complete a Tax Credit application make sure you include the value of Gift Aid donations.
- If you pay higher rate tax and complete a Self Assessment Return make sure you include the gross total of all Gift Aid donations - this is how you claim the higher rate relief.
- If you pay higher rate tax you can elect to have any higher rate tax relief due carried back to the previous year of assessment. The election can be made for any or all Gift Aid payments made between the end of the tax year and the following 31 January (as long as your return has not already been sent in).
- If you pay higher rate tax but don't complete a Self Assessment Return you can claim the additional relief by writing to your tax office giving details of your total Gift Aid donations.
Queries
If you have any queries about Gift Aid you can contact our Charity helpline on 0845 3020203 (option 3), which is open from 8.30am to 5.00pm, Monday to Friday.
