Gift Aid

This is a valuable relief for gifts to UK charities; the gift is made out of the donor’s taxed income and the charity benefits by claiming basic rate tax on the value of the gift.

• Higher rate taxpayers can claim extra tax relief of 20% of the gross value of the gift.

• For top rate taxpayers, the extra relief is 25%.

• There is no cap on the amount that can qualify for Gift Aid, provided the donor has paid sufficient tax during the tax year to cover the charity’s reclaim from HMRC.

Example
If you are a higher rate taxpayer and you make an £800 donation to a charity, the gross value of the gift to the charity is £1,000, since it can claim back the basic rate tax of £200.

You can claim an additional 20% tax relief on the gross value, reducing the net cost to £600.

Tax planning points
• You must provide the charity with a Gift Aid declaration, so that both parties can claim the relevant tax relief.
• You can elect for donations made in one tax year to be treated for tax purposes as made in the prior year.
– This would be of benefit, for example, if you are a higher or top rate taxpayer in 2024/25 but not in 2025/26, in othere cases, it will mearly accelerate the higher or top rate relief.
– The election can only be made when submitting your tax return, which must be filed on time.
• Donating assets (eg shares, land and property) to charity while you are alive can also attract income tax relief. Additionally:
– any gain arising on the donation of such assets is exempt from CGT; and
– the gift itself is not subject to Inheritance Tax (IHT), even if the donor dies within seven years.