How does gift aid work?
The Gift Aid scheme is for gifts of money by individuals who pay UK tax. Gift Aid donations are regarded as having basic rate tax deducted by the donor and charities can claim this money back from the government, at no expense to the individual. All donors have to do is agree to the following statement:
Please treat all donations made by me since December 2001 as Gift Aid donations. I understand that I must have paid an amount of income tax or capital gains tax equal to the tax that you reclaim on my donation.
Charities can claim 25p from every £1 donated.
What kind of tax qualifies?
You can use Gift Aid if the amount of Income Tax and/or Capital Gains Tax you’ve paid in the tax year in which you make your donation is at least equal to the amount of basic rate tax the charity is reclaiming on your gift.
You don’t necessarily have to be working to be paying tax. Apart from tax on income from a job or self-employment, the tax you’ve paid could include:
- Tax deducted at source from savings interest
- Tax on State Pension and/or other pensions
- Tax on investment or rental income
- Capital Gains Tax
Only UK tax counts, so if you pay tax outside the UK you won’t be able to use Gift Aid.
Higher rate taxpayers can make claims on their Self Assessment tax return as they can claim the difference between the higher and basic rate.
More information is available on the HMRC website: www.hmrc.gov.uk/individuals/giving/gift-aid.htm
