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‘Tis the season for Giving – Gift Aid and Tax Relief

The lead up to Christmas is a popular time for charitable donations. In fact, November and December are peak months for giving, largely due to established fundraising campaigns, as a recent study into Giving showed. Although there are now fewer people giving money to charity, those who do give are giving more money than before. Overall, around £10.1bn were given to charity in 2018, with only 51% of donors using Gift Aid.

What is Gift Aid?

Gift aid is a scheme that allows charities to claim the basic rate of tax that the donors have paid from HMRC. By claiming Gift Aid you are in effect increasing the value of your donation by 25% to the charity, meaning that the causes you care about get more money – win win!

As a UK taxpayer, all you need to do is fill in a Gift Aid declaration for the charity each time you donate. You can include all donations from the past 4 years – as long as you paid enough tax.

Recent figures from HMRC showed that the amount of Gift Aid claimed by charities rose to a record £1.35bn, up £90m from the year before, from eligible donations worth £5.41bn. This followed a two year plateau.

How does Gift Aid affect your Tax?

Donations will only qualify for tax relief if they are less than four times the amount of tax that you have paid in that tax year – this applies to both income or capital gains tax.

Higher rate tax payers (who have between £50,001 and £150,000 of taxable income) can claim the difference between the rate they pay and the basic rate on the donation. You will need to include this information in your Self Assessment Tax Return. And did you know that you can claim tax relief on donations you’ve made in the current tax year, enabling you to get your tax relief sooner?

If your employer has a Payroll Giving scheme set up and you therefore donate straight from your wages, you do not pay the difference between the higher and basic tax rate on your donation.

If you have any questions regarding Gift Aid and Tax Relief, please contact your local Hartley Fowler office. We also have a specialist charity team to assist charities and NFP’s with their statutory reporting and taxation compliance issues.

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