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.
A Gift Aid declaration must include:
- your full name
- your home address
- the name of the charity
- details of your donation, and it should say that it’s a Gift Aid donation
Higher rate taxpayers
If you pay tax at the higher or additional rate, you can claim the difference between the rate you pay and basic rate on your donation. Do this either:
- through your Self Assessment tax return
- by asking HM Revenue and Customs (HMRC) to amend your tax code
Example You donate £100 to charity – they claim Gift Aid to make your donation £125. You pay 40% tax so you can personally claim back £25.00 (£125 x 20%).
With Payroll Giving, you don’t pay the difference between the higher and basic rate of tax on your donation.
Getting tax relief sooner
In your Self Assessment tax return, you normally only report things from the previous tax year.
But for Gift Aid, you can also claim tax relief on donations you make in the current tax year (up to the date you send your return) if you either:
- want tax relief sooner
- won’t pay higher rate tax in current year, but you did in the previous year
You can’t do this if:
- you miss the deadline (31 January if you file online)
- your donations don’t qualify for Gift Aid – your donations from both tax years together must not be more than 4 times what you paid in tax in the previous year
If you don’t have to send a tax return, contact HMRC and ask for a P810 form. You’ll need to submit it by 31 January after the end of the previous tax year.
So if you want to donate now (before the end of the tax year) you could claim back tax by carrying it back into the previous tax year.