Gifts to charity

Where possible higher rate taxpayers should “Gift Aid” any payments to charity to provide additional benefit to the charity.  This will also enable the individual to obtain additional tax relief on the payment.

For example, where an individual makes a £100 cash donation, the charity is able to reclaim a further £25 from HMRC making a gross gift of £125. Where the individual is a 40% UK higher rate taxpayer, he or she is able to claim a further £25 tax relief under self-assessment, reducing the net cost of their donation to £75. Under Scottish rates of tax, a 41% taxpayer will be able to claim additional tax relief of £26.25 on this level of donation, reducing the net cost of his/her donation to £73.75.

Note that the donor is required to make a declaration that they are a taxpayer and those that have not paid sufficient tax to support the Gift Aid amount will taxed on the shortfall.

Gift Aid does not just apply to gifts of cash. Many charity shops will now sell donated items and are able to treat the sale proceeds as Gift Aided donations.

It is also possible to gift quoted securities and land and buildings to charity and claim Gift Aid on the market value of those assets.

Gift Aid donations can be carried back and treated as if they were made in the previous tax year. This can be useful where a taxpayer was a higher rate taxpayer in the previous tax year but is now a basic rate taxpayer.

Note that if you wish to carry back any gift aid payments made on or after 6 April 2019 to 2018/2019, the payments must be made BEFORE your 2019 Return is lodged.  Effectively this means that you can only carry back gift aid payments made between 6 April 2019 and 31 January 2020 to 2018/2019.

Photo by Prudence Earl on Unsplash