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Gift aid for individuals

 
Highlights
  • Gift aid was introduced in 1990 as a way for donors who are UK taxpayers to increase the value of the gift the charity receives, and for higher-rate taxpayers to obtain tax relief on donations to charity.
  • Gift Aid works differently if you are a basic rate, higher rate or additional rate taxpayer.
  • You need to make a simple declaration to the charity for your gift to be treated as a Gift Aid donation. A sample declaration is included below.


 

Read more about Gift aid for individuals

Using gift aid means that the charity can claim the basic rate of income tax that you have paid on the donation (i.e. 20%, or additional 25p for every pound you give) from HM Revenue & Customs (HMRC). You can make payments of any size by cash, cheque, postal order, direct debit, standing order, debit or credit card or even in a foreign currency.

To be eligible for Gift Aid, you must:

  • Make your gift to a UK registered charity or Community Amateur Sports Club (CASC), or a charity in the EU, Norway or Iceland that meets the English and Welsh definition of a charity, and is registered with HMRC.
  • Pay tax in the UK
  • For the relevant tax year, pay income tax or capital gains tax at least equal to the amount of basic rate relief claimed by the charity and on all Gift Aid donations made to other charities.
  • There are rules limiting the benefits a donor can receive for a Gift Aid donation

How Gift Aid works

For basic-rate tax payers, charities can claim back the tax you have paid. That is, charities take your (after-tax) donation and then reclaim basic rate tax (20%) on its ‘gross’ equivalent (the amount before the tax was deducted).

Example 1

If you give a charity £1,000 under Gift Aid, the charity can claim back £250 on your donation. This is because the ‘gross’ amount of the gift is £1,250, or £1,000 ÷ 0.8.

Example 2

For a charity to receive £1,000, you make a Gift Aid donation of £800. This amount is £1,000 less tax at the basic rate of 20%. The charity claims back tax on your donation at the basic rate, or £200.

As long as you have paid at least £200 in tax during the financial year in which you make the donation, HMRC will repay the tax to the charity. In general, you can work out the amount of tax the charity will reclaim by dividing your donation by four.

For higher-rate payers

If you are a higher-rate taxpayer, you are entitled to claim the difference between the basic rate (20%) and the higher rate (40% or 50% until 6 April 2013, and then 40% or 45%) on the total value of your donation (the ‘gross’ amount). You can make this claim on your Self-Assessment tax return and if you file your tax return online the system will work out the relief owed.

Example 3 – if you are a higher rate tax payer (40%)

Using Example 1 above, you can claim back £250, which is 20% of your gross donation of £1,250. The net cost of the gift to you is therefore £750, while the charity benefits from the ‘gross’ value of £1,250.

Example 4 – if you are an additional rate tax payer (50%)

Using Example 1 above, you can claim back £375, which is 30% of your gross donation of £1,250. The net cost of the gift to you is therefore £625, while the charity benefits from the ‘gross’ value of £1,250.

Example 5 - if you are an additional rate tax payer after 6 April 2013 (45%)

Using Example 1 above, you can claim back £312.50, which is 25% of your gross donation of £1,250. The net cost of the gift to you is therefore £687.50, while the charity benefits from the ‘gross’ value of £1,250.

If you want to spread payments (for example, yearly or monthly), you can still use Gift Aid and make one simple declaration. The charity should provide you with a Gift Aid Declaration form, or you can use HMRC’s model form (see below). You would then send the cheques on agreed dates or make out a regular standing order or direct debit to the charity.

Similarly, if you want to plan to make a number of gifts to the same charity, you only need to sign the form once, as long as you use a version of the form that makes it clear you want this and all future donations to be Gift Aid donations.

Donor benefits

Charities may want to recognise your donation and offer tokens of appreciation. However, there are limits on the value of the benefits given in return for a donation. If they are worth more than a certain amount, the payment cannot be considered a donation and is not eligible for tax relief.

Acknowledgement on literature, poster or plaques is fine provided they are modest. If the charity is a heritage property or wildlife sight, they may offer you free or reduced entry. Membership fees may allow a charity to claim back Gift Aid in specific circumstances.

Literature that describes the work of the charity which is provided as a gift in return for a donation is not regarded as a benefit for Gift Aid purposes and so should not be taken into account in the limits for gifts detailed below.

The limits are:

 

 

Amount of donation

Maximum value of benefits

£0 - £100

25% of the donation

£101 - £1,000

£25

£1,001+

Made before 6 April 2011

5% of the donation (up to a maximum of £500)

Made on or after 6 April 2011

5% of the donation (up to a maximum of £2,500)

 

As well as passing the relevant value test, the value of benefits received by the same donor in one tax year as a result of making more than one donation to the same charity in that tax year must not exceed:

  • £500 for donations made between 6 April 2007 and 5 April 2011.
  • £2,500 for donations made on or after 6 April 2011.

The process of making Gift Aid donations:

Your donation will qualify for Gift Aid if you:

  • Pay at least as much UK tax income tax or capital gains tax at any rate as the amount your chosen charity (and all other charities you support in this way) will reclaim on your gifts in the financial year in which you make them; and
  • Make a simple declaration to the charity that you want your gift to be treated as a Gift Aid donation. You may send this by post, fax or email.

 

 

Sample Gift Aid declaration – for past, present & future donations

 

Name of charity or Community Amateur Sports Club

-------------------------------------------------------------------

Please treat as Gift Aid donations all qualifying gifts of money made

today in the past 4 years in the future

Please tick all boxes you wish to apply.

I confirm I have paid or will pay an amount of Income Tax and/or Capital Gains Tax for each tax year (6 April to 5 April) that is at least equal to the amount of tax that all the charities or Community Amateur Sports Clubs (CASCs) that I donate to will reclaim on my gifts for that tax year. I understand that other taxes such as VAT and Council Tax do not qualify. I understand the charity will reclaim 28p of tax on every £1 that I gave up to 5 April 2008 and will reclaim 25p of tax on every £1 that I give on or after 6 April 2008.

Donor’s details

Title ------------- First name or initial(s) --------------------------------------------------------------------------

Surname --------------------------------------------------------------------------------------------------------------

Full home address -------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------

Postcode ----------------------------------

Date ------------------------------------------------------------------------

Signature ----------------------------------------------------------------

Please notify the charity or CASC if you:

Want to cancel this declaration

Change your name or home address

No longer pay sufficient tax on your income and/or capital gains.

If you pay Income Tax at the higher or additional rate and want to receive the additional tax relief due to you, you must include all your Gift Aid donations on your Self Assessment tax return or ask HM Revenue and Customs to adjust your tax code.


 

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