Claiming higher rate tax relief on charitable donations under Gift Aid

Charitable giving not only benefits the recipient but can also offer tax advantages to the donor.

The Gift Aid scheme allows charities to claim back 25p every time an individual donates £1 at no extra cost to the donor.

If you are a higher-rate taxpayer, you can claim additional tax relief on your donations.

What is Gift Aid?

Gift Aid is a tax incentive that allows charities and community amateur sports clubs (CASCs) to claim back the basic rate tax already paid on donations by the donor. This means that if you’re a taxpayer and you make a donation under Gift Aid, the charity can claim an extra 25 per cent from the government.

How does higher rate tax relief work?

If you pay tax above the basic rate, you can claim the difference between the rate you pay and the basic rate on your donation. Here’s a breakdown:

If you pay tax at the higher rate of 40 per cent, you can claim back 20 per cent on your gross donation (the donation amount plus Gift Aid).

If you pay tax at the additional rate of 45 per cent you can claim back 25 per cent on your gross donation.

Recording charitable donations

Whenever you make a donation under Gift Aid, ensure you keep a record of the amount, the charity’s name, and the date of the donation. This can be in the form of bank statements, chequebook stubs, or written confirmations from the charity.

For a charity to claim Gift Aid on your donation, you must complete a Gift Aid declaration. This confirms that you’re a UK taxpayer and have paid enough tax to cover the Gift Aid claim by the charity.

If you are a higher or additional rate taxpayer, keep a note of the total amount of Gift Aid donations you’ve made during the tax year. This will be crucial when claiming your additional tax relief.

Claiming higher rate tax relief

If you complete a self-assessment tax return, you can use it to claim back the additional tax relief. Include your total Gift Aid donations on the form and the tax relief will be calculated for you.

If you don’t complete a tax return, you can contact HM Revenue & Customs (HMRC) and ask for an adjustment to your tax code. This will allow you to receive tax relief directly through your wages or pension.

If you’ve failed to claim tax relief from previous years, you can do so by writing to HMRC. Provide details of your donations and ensure you make the claim within four years of the end of the tax year in which you made the donation.

The Gift Aid scheme offers a win-win situation for both charities and donors. Charities receive an additional 25 per cent on donations, and higher-rate taxpayers can claim significant tax relief.

If you’d like more advice and information about claiming higher rate tax relief through Gift Aid, then contact us today.

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