I gave money to charity, what is Gift Aid?

Have you given money to charity over the last year? Perhaps by supporting a friend’s JustGiving fundraise? Or supporting Comic Relief?

If you are a higher (40%) or additional (45%) rate taxpayer, your contributions allow you to claim tax relief.

Your donation to the charity will also be topped up with an additional 25% from HMRC.

For example

If you donate £100, the charity will claim an extra £25 from HMRC.

You can also claim tax relief, on your donation.

• If you are a 40% taxpayer, you can personally claim back £25.00 (20% of £125).
• If you are a 45% taxpayer, you can personally claim back £31.25 (25% of £125).

How does this work?

The amount you gift will “extend” your basic rate (20%) band. So you end up paying more tax at the 20% rate, instead of at the 40% or 45% rates.

The 60% trap

If you earn between £100,000 and £125,140 your personal allowance will begin to be tapered and you will fall under the effective 60% tax rate trap. Full details here.

Gift Aid donations extend your personal allowance threshold (£100,000). So a £1,000 donation will see your personal allowance only start to taper at £101,000. Effectively 60% tax relief.

Gift Aid can get more complicated. For example, you can even gift shares or land to a charity. You will receive tax relief for these gifts too. We’ll save this for another day.

Either way, with Taxd, it’s easy to claim Gift Aid through your tax return.

But, I don’t file a Self Assessment tax return?

You can contact HMRC and ask for a P810 form. Which you’ll need to submit it by 31 January after the end of the previous tax year.

I haven’t paid much tax, will I qualify for gift aid?

The 25% that the charity claim back from HMRC is in theory the tax that you have paid.

So if you’ve paid £1,000 in tax across the tax year (6 April to 5 April the following year), you can donate up to £4,000 and your donation will qualify.

If you have not paid enough tax, HMRC can request you to pay the difference.