The benefits of Gift Aid, for you and charities.

After the recent success of Perrys 3 Peaks Challenge, which raised over £5,000 for Communigrow, I wanted to remind everyone about how you can make your charitable donations go further using Gift Aid. Gift Aid is an often-overlooked method of obtaining tax relief on your donations while giving the receiving organisation extra cash. In this blog I will explain how Gift Aid works and provide a worked example.

How it works

Gift Aiding a donation provides benefit to you and the charity in the following ways:

• The charity can claim 25% extra cash on your donation from the government
• You get tax relief if you are a higher rate tax payer through extension of your basic rate tax band.

I have demonstrated how this works below.

In this example, Peter is a higher rate tax payer earning £60,000. He makes a donation to a charity of £1,000 during the 23/24 tax year and claims Gift Aid on his donation. This means the charity can then get 25% of his donation from the government giving the charity an extra £250 on top.

When Peter comes to prepare his tax return his basic rate band is increased by the gross donation of £1,250 which means that more tax is paid at the basic rate. This effectively means he gets tax relief of 20% of the gross donation. The table below shows how this works.

Therefore, by claiming Gift Aid, Peter effectively makes a donation of £1,250 to the charity that only costs him £750. This is a saving of £500 if the same amount was donated without Gift Aid.

How to claim

For individuals to claim tax relief on their donations they need to complete a declaration when making their donation. If the charity is registered, they should simply allow you to “tick a box” when you make the donation. Therefore, it couldn’t be easier to give more money to charity while saving money on the overall donation.