Gift Aid increases the value of donations to the charity by allowing it to reclaim basic rate tax on your gift. If you pay higher rate tax you can claim extra relief on your donations. If you claim higher Personal Allowances or tax credits, Gift Aid donations can sometimes increase your entitlement.
How Gift Aid works
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. Charities take your donation - which is money you've already paid tax on - and reclaim the basic rate tax from HM Revenue & Customs (HMRC) on its 'gross' equivalent - the amount before basic rate tax was deducted.
Basic rate tax is 20 per cent, so this means that if you give £10 using Gift Aid, it’s worth £12.50 to the charity.
How to make a donation using Gift Aid
In order to make a Gift Aid donation you’ll need to make a Gift Aid declaration. You will need to complete a simple form - one form can cover every gift made to the charity for whatever period you choose, and can cover gifts you have already made and/or gifts you may make in the future.
A Gift Aid declaration must include:
- your full name
- your home address
- the name of the charity
- details of your donation, and it should say that it's a Gift Aid donation
Gifts made jointly by people living together
You can use Gift Aid for gifts you make jointly if you tell the charity how much each of you is giving and if you each make a Gift Aid declaration.
Making sure you’ve paid enough tax to use Gift Aid
You can use Gift Aid if the amount of Income Tax and/or Capital Gains Tax you’ve paid for the tax year in which you make your donation is at least equal to the amount of basic rate tax the charity and any other charities you donate to will reclaim on your gift. A tax year runs from 6 April one year to 5 April the next. If you make a number of Gift Aid donations, you will need to consider the tax you’ve paid on each donation on an accumulative basis. If you don’t pay enough tax you will need to pay any shortfall in tax to HMRC.
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 (including tax credits on UK dividends).
- Capital Gains Tax on gains.
Other taxes such as VAT and Council tax do not qualify, nor does any non-UK tax.