According to HMRC, millions of pounds of higher and additional rate tax relief goes unclaimed every year because individuals either don’t realise they are entitled to it, or they fail to identify their gift aid payments made.

If you make a gift aid donation or a donation to a community amateur sports club (CASC), this is treated as made net of a 20% basic tax rate deduction. For example, if you donate £80, the charity will claim Gift Aid from the government to make your donation £100 (80% of £100 is £80). If you are a basic rate taxpayer (income under £50k, already taxed at 20%) there is nothing further you need to do. However, if you are a higher rate or additional rate taxpayer, this is earnings over £50k and £125k respectively, you are entitled to claim further tax relief.

For example, if you are a higher rate taxpayer (income over £50k, taxed at 40%) and you donate £80 to charity, with the gross contribution being £100, since your income is subject to 40% tax, you can personally claim back an additional 20% of tax relief of £20.00 (£100 x 20%).

Higher and additional rate taxpayers must make sure they keep a list of all donations made in the tax year and then claim the extra tax relief back on a personal tax return.

Keeping a log of all donations you make is key to maximising your own tax relief. Many individuals can overlook donations they make, for example many visitor attractions like museums and zoos are registered charities and accept donations in lieu of entrance fees.

Couples can maximise their tax relief by ensuring all donations made are in the name of the one who pays tax at the highest rate. They should evaluate their tax position at the beginning of each tax year to ensure maximum tax relief is obtained.

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