Tax Benefit on Charitable Giving in the UK
How Gift Aid Works
Eltham College is a register charity, No. 1058438. The Gift Aid scheme is for gifts of money by individuals who pay UK tax. If you are a UK taxpayer, tax has already been paid on money you donate. By donating through Gift Aid, we can reclaim the basic rate tax from HM Revenue & Customs (HMRC) on its ‘gross’ equivalent – the amount before basic rate tax was deducted. Higher rate tax payers can reclaim the difference between the two rates through a Self-Assessment tax return.
If you give £100 using Gift Aid, it will be worth £125 to Eltham College.
Claiming Back Higher Rate Tax
If you pay higher rate tax, you can claim the difference between the higher rate of tax 40 and/or 45% and the basic rate of tax 20% on the total ‘gross’ value of your donation to Eltham College. For example, if you donate £100, the total value of your donation to us is £125 – so you can claim back:
• £25 – if you pay tax at 40% (£125 × 20%)
• £31.25 – if you pay tax at 45% (£125 × 20%) plus (£125 × 5%)
Self Assessment Tax Return
You can make this claim on your Self Assessment tax return, if you were sent one. It’s important to keep a record of the total amount of all your Gift Aid donations for each tax year. If you normally complete a tax return you can tell HMRC about your Gift Aid donations by completing the section on Gift Aid payments. If you don’t complete a return, you can give the details on form P810 Tax Review.
Making sure you’ve paid enough tax to use Gift Aid.
You can use Gift Aid if the amount of Income Tax and/or Capital Gains Tax you’ve paid for the tax year in which you make your donation is at least equal to the amount of basic rate tax we will reclaim on your gift. A tax year runs from 6 April one year to 5 April the next. You don’t necessarily have to be working to be paying tax. Apart from tax on income, the tax you’ve paid could include:
• tax deducted at source from savings interest
• tax on State Pension and/or other pensions
• tax on investment or rental income (including tax credits on UK dividends)
• Capital Gains Tax on gains
Further information about Gift Aid can be found on the HMRC website.