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Gift Aid increases the value of donations to charities and Community Amateur Sports Clubs (CASCs) by allowing them to reclaim basic rate tax on your gift. If you pay higher rate tax you can claim extra relief on your donations. If you claim higher Personal Allowances or tax credits, Gift Aid donations can sometimes increase your entitlement.
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The Gift Aid scheme is for gifts of money by individuals who pay UK tax. Gift Aid donations are regarded as having basic rate tax deducted by the donor. Charities or CASCs take your donation - which is money you've already paid tax on - and reclaim the basic rate tax from HM Revenue & Customs (HMRC) on its 'gross' equivalent - the amount before basic rate tax was deducted.
Basic rate tax is 20 per cent, so this means that if you give £10 using Gift Aid, it’s worth £12.50 to the charity. For donations between 6 April 2008 and 5 April 2011 the charity or CASC will also get a separate government supplement of three pence on every pound you give.
In order to make a Gift Aid donation you’ll need to make a Gift Aid declaration. The charity will normally ask you to complete a simple form - one form can cover every gift made to the same charity or CASC for whatever period you choose, and can cover gifts you have already made and/or gifts you may make in the future.
A Gift Aid declaration must include:
You can use Gift Aid for gifts you make jointly if you tell the charity or CASC how much each of you is giving and if you each make a Gift Aid declaration.
You can use Gift Aid if the amount of Income Tax and/or Capital Gains Tax you’ve paid for the tax year in which you make your donation is at least equal to the amount of basic rate tax the charity or CASC and any other charities or CASCs you donate to will reclaim on your gift. A tax year runs from 6 April one year to 5 April the next. If you make a number of Gift Aid donations, you will need to consider the tax you’ve paid on each donation on an accumulative basis. If you don’t pay enough tax you will need to pay any shortfall in tax to HMRC.
You don’t necessarily have to be working to be paying tax. Apart from tax on income from a job or self-employment, the tax you’ve paid could include:
Other taxes such as VAT and Council tax do not qualify, nor does any non-UK tax.
To work out if you’ve paid enough tax to cover your donations, divide the donation value by four. For example, if you give £100 in a particular tax year you will need to have paid £25 tax over that period. (£100/4 = £25). (Note that this calculation is based on the basic rate tax of 20 per cent)
If you don’t think you've paid enough tax this year, you may be able to carry back your donation to the previous tax year. See the later section 'Carrying back Gift Aid donations to the previous tax year'
If you pay higher rate tax, you can claim the difference between the higher rate of tax 40 and/or 45 per cent and the basic rate of tax 20 per cent on the total 'gross' value of your donation to the charity or CASC.
For example, if you donate £100, the total value of your donation to the charity is £125 - so you can claim back:
You can make this claim on your Self Assessment tax return, if you were sent one. For more information see section below ‘Telling HMRC about your Gift Aid donations’.
You can ask for Gift Aid donations to be treated as being paid in the previous tax year if you paid enough tax that year to cover both any Gift Aid gifts you made that year and the ones you want to backdate.
Your request to carry back the donation must be made before or at the same time as you complete your Self Assessment tax return for the previous year but no later than the filing deadline for the tax return, which is 31 October if you file a paper tax return, or 31 January if you file online. If you don’t complete a tax return you can ask your Tax Office to send you a form P810 Tax Review - you must send this by no later than 31 January after the end of the tax year to which you wish to carry back your gift.
Mr Jones makes a Gift Aid donation of £1,000 on 1 June 2009. He can either treat the donation as being for this tax year (2009-10) or carry back the relief to last tax year (2008-09). As he paid enough tax last year to cover both last year’s donations and this one, he chooses to carry the relief back. He hasn’t yet completed a tax return for 2008-09, so he makes his carry back election and claim on that return and files it online before 31 January 2010.
But if Mr Jones had already sent back his tax return for 2008-09, he would only be able to ask for the donation to be treated as Gift Aid for the year 2009-10. You can’t change a tax return in order to carry back a donation.
If you claim higher Personal Allowances, Married Couple's Allowance or tax credits, it's important to let HMRC know about any Gift Aid donations. They will subtract the amount you donate plus the basic rate tax (that is, the ‘grossed’ up donation) from your total income and use the reduced figure to work out the value of your allowances or tax credits. This may have the effect of increasing these allowances or credits if your income was above the relevant 'income limit' that applies. Follow the links below to find out more about these income limits.
It’s important to keep a record of the total amount of your Gift Aid donations for each tax year.
You’ll need to let HMRC know about your Gift Aid donations if:
If you normally complete a tax return you can tell HMRC about your Gift Aid donations by completing the section on Gift Aid payments.
If you don’t complete a return, you can give the details on form P810 Tax Review - available from your Tax Office, or telephone your Tax Office and ask them to make a change to your tax code.
For more help you can contact the Charities Helpline.