News and Views
Charitable donations

If you are a taxpayer and make donations to charity, other than street collections, remember to use Gift Aid.

How does Gift Aid work?

Gift Aid donations are treated as a receipt net of the 22% basic rate tax, which the charity can reclaim, so for every £10 you give, the charity will receive £2.80 from the government.
However, in order for the charity to be able to receive the tax rebate you have to be a taxpayer yourself. This means that you must have paid enough tax in the year that the gift was made to cover what the charity claims on your donation. You must also give the charity a declaration, which allows it to the tax. Most charities have a form you can use.

If you pay higher rate tax, you can personally claim relief on the difference between the basic and higher rates. For example, if you pay tax at 40% and give £10 to a charity, they will receive a refund of £2.80 and you can claim relief for 18% of the ìgross donationî of £12.80 (net gift of £10 plus tax credit of £2.80), which reduces the tax you pay by £2.30. The actual cost to you of the donation is therefore £7.70.

In the past, claim to higher rate relief for Gift Aid donations could only be made in the tax return relating to the year in which it was paid. Since 6th April 2003 relief can be claimed earlier by including the amount paid between 6th April and the date on which tax return for the preceding year is completed.

For example, a 2003 tax return, which is sent to the Inspector of Taxes on 30th September 2003 could include claim to higher rate tax relief in respect of Gift Aid donations made in the year ended 5th April 2003 and in the period 6th April to 30th September 2003.

A record of claims submitted has to be kept in order to avoid double claim.