Gift Aid

Gift Aid is a government scheme that allows registered charities like the Sailors’ Children’s Society to claim the basic income tax rate on every £1 to donated to the charity.

For every £1 you donate the charity can reclaim an additional 25p. And if you are a higher or additional rate taxpayer you can claim additional tax relief yourself. So, if you are a 40% taxpayer and make a Gift Aid donation of £100 to charity, the result is the charity has £125, but the net cost to you after tax relief is just £75. If you are an additional rate taxpayer the net cost would be £68.75.

To benefit from Gift Aid, the donor needs to be a UK taxpayer and must have paid enough income tax in the tax year the claim is being made, to cover all the tax that is being claimed from their Gift Aid donations.
To Gift Aid a donation, you will need to complete a Gift Aid Statement. This statement is to confirm the donor is a UK Income Tax and Capital Gains Tax payer and that they would like the Sailors’ Children’s Society to Gift Aid their donations. This can be for all donations made in the past four years and all future donations, or just a single donation.

Payroll Giving

Tax relief can also be gained by donating straight from your wages or pension. Check to see whether your employer or pension provider runs a scheme. If they do then donations are treated as a deduction to your income prior to the calculation of tax, so the donor gets full tax relief straight away regardless of the rate of tax they pay.

Sponsorship

If you are collecting sponsorship in aid of a charity like the Sailors’ Children’s Society and you use an online page with Virgin Money Giving, Just Giving, or Everyday Hero, your sponsors will automatically be asked if you want to Gift Aid their donation.

Tax Relief and Company Donations

Companies can also claim tax relief on cash donations made to charities. Relief is available for gifts of land and property or qualifying shares, so it is worth taking advice in advance if such transactions are being contemplated.

Legacies

Legacies are also an invaluable source of funds for many charities. Charitable legacies are themselves exempt from Inheritance Tax (IHT), but additionally, if you leave at least 10% of your net estate to charity the IHT rate payable on the remainder of your estate is reduced from the current rate of 40% to 36%. This may not sound like a large reduction, however, this means that if your will presently contains a charitable legacy, then depending on the level, you could increase this to 10% (making the charity much better off) with no detriment to your other beneficiaries because it is HM Revenue & Customs that suffers the loss. This would occur where the increase in donation is offset by the fall in the tax rate. So now may be a good time to review your will and consider how charitable legacies could be of benefit to you as well as the charities you support.

Matched Giving

Finally, tax reliefs are not the only way to maximise the benefit of your donation to charity. Certain firms and organisations offer ‘matched giving’ so that every £1 raised for or donated to a charity is matched by an extra £1. This is something you may wish to look out for to make your donation that much more worthwhile.

We are extremely grateful to Streets Chartered Accountants for providing this useful guide to Gift Aid. If you are seeking more guidance or advice on the impact of Gift Aid on your personal or business tax affairs then please do visit www.streets.uk or email info@streets.uk.