Are you make income tax savings on Gift Aid donations?
When it comes to making savings, any reduction to your income tax bill must be welcomed. As a famous grocer points out: “Every little helps”.
Keeping records of donations is important, as tax relief on Gift Aid is a little-known area and is often overlooked when filing Self-Assessment tax returns.
Gift Aid represents a repayment of the 20 per cent UK basic rate income tax paid on their donation, which is repaid to the charity to boost their funding.
What are the benefits from donations?
Donating through Gift Aid means charities can claim an extra 25p for every £1 you give.
Self-Assessment taxpayers can claim tax relief on Gift Aid donations, once the charity has claimed the tax relief, on their own tax return.
You can also claim in the current tax year if you want the cash sooner or have previously paid the higher rate of income tax.
But HMRC says it is important to keep records of those donations if you wish to claim back tax on them.
You should keep records showing the date, the amount and which charities you’ve donated to if claiming tax back through your Self-Assessment tax return or by asking HM Revenue & Customs (HMRC) to amend your tax code.
Higher rate taxpayer benefits
If a taxpayer is in the 40 or 45 per cent bracket, then you can claim the difference between that rate and the basic rate of 20 per cent.
As an example, at the 40 per cent tax rate and you donate £200:
- The charity claims Gift Aid, which makes the total donation now worth £250
- You claim back 20 per cent (the difference between 20 and 40 per cent) of £250 which is £50
You can include all donations from the last four years, and you must inform the charity about any tax years where you did not pay enough tax.
For help and advice on Gift Aid and related tax matters, please contact us today.
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