How do I claim Tax Relief on a Gift Aid Payment?

Gift Aid is an official government scheme that means charities and CASCs (Community Amateur Sports Clubs) can reclaim the tax paid on your charitable donation and it doesn’t cost you a penny more.

For example:

If you donate £10 to a charity with Gift Aid, they get your £10 + an extra £2.50 of reclaimed tax from the government.

Eligibility criteria for Gift Aid registration

• You must be a UK taxpayer.
• The donation has to come from a personal bank or building society account.
• You must complete a Gift Aid declaration, including your name and full address, for each individual charity or CASC.
• You must pay income tax or capital gains tax to the amount that the charities or CASCs can reclaim in the relevant tax year.
• Check that the charity or CASC you are donating to is appropriately registered.

Circumstances where Gift Aid does not apply

Gift Aid can only be claimed on the donation of an individual taxpayer, which means that there are particular rules about some situations. These include church collections, charity auctions, sponsored events, membership fees to belong to a charity, events, charities connected to schools, paid back volunteer expenses and takings from charity shops.

Charities cannot claim Gift Aid on money donated through Payroll Giving, by limited companies and selling charity cards, amongst other things which is fully explained in the GOV.UK list of rules.

For the individual, Gift Aid is an amazing way to add 25% to your charitable donation.

Higher Rate and Additional Rate Taxpayer Bonus

As a Higher or Additional Rate taxpayer, you can also claim tax relief on your charitable donation by participating in the Gift Aid Scheme.

Basically, you are entitled to reclaim either 20% or 25% on your total donation. This is the difference between the basic 20% rate of tax and your 40% or 45% tax rate.

Example:

If you pay Higher rate tax at 40% and donate £100.00 to a recognised charity having registered for Gift Aid.

The charity gets your £100 plus £25.00 gift aid. You can reclaim 20% of £125.00, which is £25.00.

You just have to make sure that you do not donate any more than four times your income tax or capital gains tax amount for that tax year.

How do I claim Gift Aid Tax Relief from HMRC?

Tax relief for Gift Aid donations is given either through PAYE or self assessment with there being different ways to claim depending on your circumstances.

Claim Gift Aid through PAYE

For taxpayers who pay tax at the higher rate and don’t complete a tax return you can claim your Gift Aid tax relief either through requesting a change to your tax code.

You can contact HMRC to tell them and you will be given a new tax code which will result in you paying less tax until the end of that tax year.

If you are trying to claim Gift Aid tax relief for previous years (you can go back four tax years) you may be sent a refund of tax as a BACS transfer or cheque.

Claim Gift Aid tax relief through Self Assessment

If you complete a self assessment tax return your eligible donation needs to be entered on your tax return to allow for the tax relief to be calculated.

When your tax return is processed by HMRC any overpaid tax will be repaid to the instructions given on your tax return.