Gift Aid is a way for the 2nd Reigate to increase the value of your subscriptions and other giving by claiming back the basic rate tax paid by you to the Tax Man. It can increase the value of donations by a quarter at no extra cost to you. If you have paid any tax this year on your earnings, we can claim back the Gift Aid on your donation without you doing anything except signing a form.
Tax relief for charities
Gift Aid is an easy way to help your charity maximise the value of its donations, as you can reclaim tax from HM Revenue & Customs (HMRC) on its ‘gross’ equivalent – its value before tax was deducted at the basic rate. This is 20 per cent from 6 April 2008. You can work out the amount of tax you can reclaim by dividing the amount donated by four. This means that for every £1 donated, we can claim an extra 25 pence.
Tax relief for donors
If you are a higher rate taxpayer, you too can benefit from tax relief as they can claim back the difference between the higher rate of tax at 40 per cent or 50 per cent and the basic rate of tax at 20 per cent on the total value of the donation – a total of 20 per cent and/or 30 per cent. So if £1 was donated, the gross donation would be £1.25, so a donor liable at the 40 per cent tax rate could claim 25 pence back (20 per cent of £1.25).
You must pay at least as much UK tax (Income Tax and/or Capital Gains Tax) as the amount of Income Tax that you’re reclaiming. If a donor makes a number of Gift Aid donations, they must pay a sufficient amount of UK tax on the total amount of those donations and they may be required to pay any shortfall in tax paid to HMRC.
Gift Aid Form
John is a 40 per cent higher rate taxpayer and donates £100 to charity. As he pays regular Income Tax on his earnings, the basic rate of tax on his donation has already been covered by his tax payments and the charity claims back the basic rate tax of 20 per cent from HMRC. So the charity is able to make a repayment claim of £25 (£100 divided by 4).
As a higher rate taxpayer, John can claim the difference between the higher rate of tax at 40 per cent and the basic rate of tax at 20 per cent on the total value of his donation, so he can claim 20 per cent of £125, a total of £25.