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Giving to charity feels good, but did you know it can also be tax-efficient?
If you’re a UK taxpayer, the Gift Aid scheme lets you stretch your donations further, boosting every £1 you give into £1.25 at no extra cost to you. Whether you’re a basic, higher, or additional rate taxpayer, understanding the rules could help you save money while supporting causes you care about.
This guide breaks down everything you need to know about Gift Aid in 2024/25.
Introduction
Gift Aid is the UK’s most generous tax relief scheme for charitable giving. It allows charities to claim an extra 25p for every £1 you donate. As a donor, you need to apply Gift Aid by completing a Gift Aid agreement with the charity, which enables them to reclaim tax on your donation.
You pay nothing extra, but your chosen causes receive substantially more funding. Higher and additional rate taxpayers can claim personal tax relief too.
Our clients save hours managing their charitable donations through Pie tax, the UK’s first personal tax app. Or if you’re just here to get to grips with it all, let’s break it down!
What is Gift Aid and how does it work?
Gift Aid lets UK charities claim back the tax you’ve already paid on your donation. When you donate £1, the charity can claim an extra 25p from HMRC.
This works because when you earn money, you pay tax on it. When you donate to charity, you’re giving away money you’ve already paid tax on. Gift Aid works by allowing charities to claim back the basic rate tax you have paid on your donation, which is currently 20%. If you pay a higher rate of tax, you may be able to claim back the difference between your rate of tax and the basic rate of tax.
Gift Aid allows the charity to reclaim that tax. Charities reclaim the basic rate of tax (currently 20%) on your donation, increasing the gross value of your gift. This means your donation is worth 25% more, without you paying an extra penny. In practice, this is how Gift Aid works:
the charity claims the basic rate of tax you have paid, boosting the gross value of your donation according to the applicable rate of tax.
Who can use Gift Aid?
You can use Gift Aid if you’re a UK taxpayer who pays enough Income Tax or Capital Gains Tax. You must pay income tax for your donations to qualify for Gift Aid. The tax you pay must cover the amount that charities will claim on your donations.
For example, if you donate £100 to charity, they’ll claim £25 in Gift Aid. You need to have paid at least £25 in tax that year.
If you don’t pay enough tax, HMRC might ask you to pay the difference. It’s worth checking before you tick that Gift Aid box.
Community amateur sports clubs (CASCs) registered with HMRC are also eligible to receive Gift Aid on donations.
Types of Donations Eligible for Gift Aid
The Gift Aid scheme covers a wide range of donation types, making it easy for UK taxpayers to support their favourite causes in different ways. Gift Aid can be claimed on cash donations, whether you give online, by cheque, or in person.
If you donate goods to charity shops, Gift Aid can also be applied when those items are sold, provided you’ve completed a Gift Aid declaration.
Sponsorship payments for charity events and fundraising activities are also eligible, as long as you’re a UK taxpayer who has paid enough income tax or capital gains tax to cover the amount claimed.
Payroll giving is another convenient option, this allows you to donate directly from your salary, and charities can claim Gift Aid on these contributions too.
Gift Aid isn’t just for one-off gifts. Once you’ve completed a Gift Aid declaration, charities can claim Gift Aid on your future donations as well, making it easy to support your chosen causes over time. Just remember, donations must be made to a registered charity or community amateur sports club (CASC) to qualify.
By understanding which donations are eligible, you can make sure your support goes even further and that your generosity is maximised through the Gift Aid scheme.
How to make a Gift Aid declaration
Making a Gift Aid declaration is straightforward. When you donate, the charity will ask if you want to add Gift Aid. You may need to fill in and sign a Gift Aid declaration form, either in writing or as a verbal declaration.
You’ll need to provide your name, address, and confirm you’re a UK taxpayer. Declarations can be made in writing, online, or as a verbal declaration (such as over the phone). You must also confirm you pay enough tax to cover the donation.
One declaration can cover all donations to that charity, past (up to four years), present and future, including donations made in the current year. This applies unless your tax status changes.
Keep it simple and honest. If you stop paying enough tax, let your charities know to stop claiming Gift Aid.
What higher rate taxpayers need to know
If you pay tax at the higher or additional rate, you can claim extra tax relief. You can claim the difference between the higher and basic rate of tax on your donations.
For example, if you’re a 40% taxpayer and donate £100, the charity receives £125 with Gift Aid. You can claim back £25 (the difference between 40% and 20%).
You can do this through your Self Assessment tax return. Alternatively, contact HMRC to adjust your tax code.
This is often overlooked, so don’t miss out on money you’re entitled to claim back!
Common Gift Aid mistakes to avoid
Not paying enough tax is the biggest mistake. You need to pay at least as much tax as the charities will reclaim.
Forgetting to update your Gift Aid declaration if you stop paying tax can cause problems. HMRC may ask you to pay the difference.
Higher rate taxpayers often miss out by not claiming their additional tax relief. I once forgot to claim for three years, recovering over £800 when I finally sorted it out!
Keep records of your Gift Aid donations. This is especially important if you'll be claiming higher rate relief.
Gift Aid Small Donations Scheme
Charities can claim Gift Aid-style top-ups on small cash donations up to £30. They can do this even without a Gift Aid declaration.
This is great for collection tins, charity buckets, and church collection plates. In these situations, getting declarations is often impractical.
Charities can claim up to £2,000 per tax year through this scheme. This helps them maximise income from smaller, anonymous donations.
Record Keeping for Gift Aid
Accurate record keeping is essential for both charities and donors when it comes to Gift Aid donations.
Charities must keep detailed records of every donation for which they claim Gift Aid, including the donor’s name, address, and the amount donated. It’s also crucial to retain copies of completed Gift Aid declarations, as these authorise the charity to claim tax relief on your behalf.
These records must be kept for at least six years from the end of the accounting period in which the donation was made. This allows HMRC to verify that the correct amount of tax relief has been claimed and that all claims are legitimate.
Donors should also keep their own records, such as receipts, bank statements, and confirmation emails, to ensure they have paid enough tax to cover the Gift Aid claimed by charities. This is especially important if you make regular donations or support multiple charities throughout the year.
By maintaining thorough records, both charities and donors can ensure that Gift Aid claims are accurate, compliant, and that everyone receives the full benefit of this valuable scheme.
Final Thoughts
Gift Aid is a simple way to make your charitable donations go further. It costs you nothing extra but makes a significant difference to charities.
Always check you're paying enough tax to cover the Gift Aid that will be claimed. This avoids unexpected tax bills later.
If you're a higher rate taxpayer, remember to claim the additional tax relief. This money is yours to keep or donate further if you wish.
Keep track of your Gift Aid donations throughout the year. This makes completing your tax return much easier if you need to.
Pie tax: Simplifying Gift Aid Tax
Pie tax, the UK's first personal tax app, takes the hassle out of managing your Gift Aid donations. Our dedicated tracker keeps everything in one place.
We automatically calculate how much your chosen charities receive through Gift Aid. This gives you a clear picture of your total charitable impact.
For higher rate taxpayers, we identify exactly how much additional tax relief you can claim. You'll never miss out on money you're entitled to get back.
Our secure system stores all your Gift Aid declarations in one place. This makes tax return time much simpler and helps you stay compliant with HMRC rules.
Feel free to explore the Pie tax app if you'd like to see how easily you can maximise the value of your charitable giving.
