Charitable giving is at the forefront of many people’s thoughts during these unprecedented times. Whether you wish to donate £10 or £10,000 to a charity all donations will be gratefully received; but you may not be aware the value of your gift could be worth even more to your chosen cause, with advantages to you as a UK taxpayer, using UK Government charitable tax reliefs.
David Windram’s recent blog explains the benefits of charitable giving using the Share Aid scheme, and this blog explores Gift Aid, another scheme for tax efficient charitable giving.
Under this scheme, for every £1 you donate to a registered charity, the government will give the charity an extra 25p. When making your donation, most charities will ask the question “Do you wish to make this donation under the Gift Aid Scheme.” Provided that you have paid sufficient tax to frank the donation, you simply answer, yes on the Declaration. This will not cost you anything further and the charity will then make the reclaim themselves.
There is a tax advantage for those taxpayers who pay tax above the basic rate of tax.
In addition to the charity claiming an extra 25% on the donation you have made, you can claim the difference between the rate of tax you pay and basic rate of tax on your donation. For example, as an illustration, if you donate £100 to charity – the charity can claim Gift Aid to increase your donation to £125. If you pay tax at the rate of 40%, you can personally claim back £25.00 (£125 x 20% being the difference between basic rate tax of 20% and the tax you pay of 40%). The relief can be claimed on your annual Self-Assessment Tax Return and if you do not complete Tax Returns, you can contact HMRC and ask them to amend your tax code accordingly.
Another advantage to taxpayers making donations under the Gift Aid Scheme, is the potential to carry back any Gift Aid donations made in the current tax year (2020/2021) and claim the tax relief in the previous tax year (2019/2020). This will result in receiving a tax repayment shortly after you submit your 2019/2020 Tax Return rather than having to wait until the end of this tax year. Please note, you can only make a claim to carry back your donations to a previous tax year, if you have not already submitted that Tax Return, you cannot amend an already submitted Tax Return.
So if you are in the process of collating your tax information for the year to 5 April 2020 and you have recently made a Gift Aid donation to charity, don’t forget to make your claim to carry back the tax relief.
Murray Beith Murray remains committed to providing you with our usual service during this unprecedented time. If this blog has raised any questions, or you would like to discuss any other personal tax matter, please get in touch or call 0131 225 1200.
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