Gift Aid Donations and the effect on higher rate taxpayers

Gift aid is a UK tax incentive that enables registered charities to reclaim the tax element of donations made by a UK taxpayer, which effectively increases the total amount of the donation.

Charities are able to claim back Basic rate tax of 20% on any donation you make which equates to an extra 25p for every £1 that is donated.

How does this work?

When you as a UK taxpayer donate to a charity, tax has already been paid on that donation. The registered charity is able to reclaim the tax element already paid to HMRC at the basic rate of 20%.

Can I claim Gift Aid?

When given the option to claim gift aid on a donation, you should only do so if you are a UK resident and UK taxpayer.

Qualifying donations

Donations qualify for Gift Aid so long as the amount you are donating is no more than four times what you have paid in tax in the corresponding tax year – this includes tax paid on both income and any capital gains.

Higher rate taxpayers

So if Gift Aid allows charities to claim back 20% on your donation, what happens if you are higher rate taxpayer?

For those of you that do pay tax at the higher rate of 40%, you are in fact eligible to claim back the difference between the rate you pay and the basic rate the charity claims on your donation from HMRC.

For example, let’s say that I am a higher rate taxpayer and I donate £1,000

  • Under the Gift Aid incentive, the charity is able to claim back basic rate tax of 20% from HMRC, which again equates to 25p for every £1 donated.
  • This means that the charity would be able to reclaim £250 thus increasing my total gross donation to £1,250
  • As I am a higher rate taxpayer, I would then be able to claim back the difference between my rate of tax (40%) and the 20% claimed by the charity.
  • Hence I would be able to claim back 20% on the total donation of £1,250 which equals £250

The rules are the same for additional rate taxpayers, the only difference being that you would be eligible to claim back 25% which would be the difference between rate of tax paid on your income (45%) and the 20% claimed by the charity on your gross donation.

How can I reclaim this Gift Aid?

This can be done either by contacting HMRC directly or by declaring any donations on your self-assessment return if you are required to complete one.

For more information on Gift Aid please visit the provided GOV. website below or feel free to contact the office.


Matthew Lay PJCO Peter Jarman
Matthew Lay

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