Gift Aid is a procedure offered by HMRC whereby we can claim back tax on the donation you make. Any donation made is considered by HMRC to include tax, so they pay us this tax. This means that as the basic rate of tax is 20%, they consider your entire donation to effectively be 80%, so they will pay us the other 20%. In real terms it can currently increase your donation by 25% – at no extra cost to you, so for every £10 you donate, it is worth £12.50 to us. This is explained below;
- Your donation = £100
- HMRC consider this to be 80%
- HMRC consider 1% of your donation to be £1.25, (£100 divided by 80 = £1.25)
- HMRC pay the 20% tax on the original donation, so £1.25 x 20 = £25
- Your total donation is £125, £100 donated directly by you and £25 that HMRC will pay to us
We can only claim this if you have completed a Gift Aid declaration, which is available here. Certain rules apply when we claim Gift Aid, but these are explained in full on the Gift Aid declaration. It is a simple one page form and you only need to complete one – every donation you make to or through us can be Gift Aided from the original form – providing you tick the box that says ‘Treat all donations as Gift Aid donations’.
In order for us to claim Gift Aid you must have paid enough tax in the tax year your donation is made, but you don’t necessarily need to be working and paying tax from your salary. Eligible tax includes Income Tax, tax deducted from savings interest, tax on a state or private pension, tax on investment, tax on rental income and Capital Gains Tax, but excludes council tax and VAT.
Higher Rate Tax Payers
If you pay tax at the higher rate, we can still only claim 20%. However, you can claim back some of the tax directly too. This is usually the difference between basic and higher rates. On your Self Assessment Tax Form you need to specify the total donation. This total donation includes any tax we have claimed back. As an example, if you donate £100;
- The £100 is the initial donation
- We claim tax through Gift Aid = £25
- Your total donation = £125
- The difference between basic and higher rate of tax is 20%
- So you can claim 20% of £125 = £25
So, you have paid us £100, but actually we have benefitted by £125, (your donation plus Gift Aid), and it has only cost you £75, (your donation less the tax you can claim back)
Gift Aid Donations and How It Affects Age Related Personal Allowance, Age Related Married Couples Allowance & Tax Credits
If you make a Gift Aid donation you should let HMRC know. They will subtract the amount you donate plus the Gift Aid from your total income. This can increase your allowance or increase the amount you receive in Tax Credits.