Published On: 9 February 2021

Covid-19 has hit charities particularly hard. Demand for their services has increased significantly but far less money is coming in from donations, leaving the sector struggling to provide vital support.

Giving now could not be more important, and the government will boost your gift with full income tax relief. For every £1 donated by a UK taxpayer claiming Gift Aid, a registered charity can claim a further 25p. For example, a £1,000 gift is topped up to £1,250 by HMRC.

A 40% taxpayer can reclaim 25p per £1 gifted. In the above scenario, this means that the £1,250 donation would only cost you £750, and an additional rate taxpayer (45%) can claim back a further £62.50.

Those earning over £100,000 start to lose their personal allowance and it is fully lost at £125,000. Gift Aid has the effect of extending the £100,000 threshold, with the personal allowance restored by £1 for every £2 donated. At an effective tax relief of 60%, a £1,250 gift could only cost £500. The charity claims the basic rate Gift Aid directly from HMRC. You will need to claim your relief via self-assessment.

Your Gift Aid declaration states that you will have paid enough tax during the year to cover the 20% tax that the charity claims from HMRC. If you haven’t, you will need to pay it.

Please do get in touch if you would like to learn more.

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