Gift Aid: Tax Relief When You Donate to a Charity

Gift Aid Scheme

Under the Gift Aid Scheme, HM Revenue and Customs offer tax relief to individuals donating money to charity. According to the Income Tax Act 2007, a donation qualifies for tax relief if it has been made by an individual who has or will pay UK tax on the sum. Upon completing a short declaration form, the donor is eligible for tax relief at the basic rate of 20%. Moreover, the charity can reclaim the basic rate income tax paid on the gift from HM Revenue and Customs. All in all, according to the Gift Aid Scheme, this will add 25% to the value of the donations.

How Can Giving to Charity Reduce My Tax Bill?

As long as you are a UK taxpayer and you donate to a UK charity, you will be eligible for tax relief. Giving through the Gift Aid scheme is considered a tax efficient way of donating to charity. Although HM Revenue and Customs returns the tax money to the charity, the donor becomes eligible for tax relief. As an individual, once you make a Gift Aid declaration, your basic and higher rate tax bands are extended by the gross charitable donation. Thus, HMRC offer tax relief to donors by increasing the proportion of their incomes that are subject to tax at the lower rates of income tax.

Gift Aid Tax Relief Statistics

According to the latest statistics from the government, the total tax relief claimed by charities increased to £3.79 billion. Similarly, Gift Aid claimed by charities also increased to a record high of £1.35 billion. According to HM Revenue and Customs, charities had lost out on £560 million from tax relief each year. The latest statistics showed a 7% rise in Gift Aid claimed by charities, suggesting increased after following HMRC’s warnings. In that same period, business rates and inheritance tax relief contributed a total of over £3 billion.


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