Gift aid – an overview Gift aid is tax relief on money donated to UK charities. We treat donations as if the donor had already deducted basic rate tax from them. The charity can then reclaim this tax to increase the value of a donation.
Gift aid rules
1. Pay enough UK income tax and/or capital gains tax themselves to cover the amount of tax the charity will reclaim
2. Give the charity a gift aid declaration, which should include :
- their name
- their home address
- the charity’s name
- details of the donation – saying that it is a gift aid donation
- confirmation that they have paid UK tax – to cover the tax the charity will reclaim.
A declaration can be made to cover individual donations, a series of donations, can cover donations made during a specified period or to cover all future donations.Tax relief
If a customer pays
1. The basic rate of tax, they cannot claim further tax relief on the payments
2. The higher rate of tax, they can claim higher rate relief on the payments by entering the donations in the gift aid box on their self assessment tax return. Customer's who receive a form P810 can declare their gift aid payments on it. How Gift Aid works
Charities take your donation (which is money you’ve already paid tax on), and then reclaim tax on its ‘gross’ equivalent (its value before tax was deducted) at the basic rate of 22 per cent. In practice, this means that if you give £10 to charity using Gift Aid, that gift is worth £12.82 to the charity. This is because 22 per cent of £12.82 is £2.82 – your £10 being the difference.
The Gift Aid scheme is only for monetary gifts.
Who can use Gift Aid?
You can use Gift Aid if the amount of tax you have paid in any tax year (6 April one year to 5 April the next) is at least equal to the amount the charity is reclaiming on your behalf. You can calculate the amount of tax the charity will reclaim by multiplying the amount you give by 22/78.
So if, for example, you give £100 to a charity in a particular tax year, they will claim back 100 x 22/78 = £28.20. You need to have paid at least this amount of tax during the same tax year to be able to donate using Gift Aid.
Higher rate taxpayers
If you’re a higher rate taxpayer, you can claim the difference between the higher rate of tax at 40 per cent and the basic rate of tax at 22 per cent on the total value to the charity of your donation (the ‘gross donation’). So, using the example above, you can reclaim higher rate relief of £23.08 (18 per cent of your gross donation of £128.20). You make this claim on your Self Assessment tax return.
If you do not pay tax, you should not use Gift Aid.
Copyright 2011: The Provincial Grand Lodge of North Wales
Created and maintained by: W.Bro. David Anthony Fink