Gift Aid Donations & Why You Should Make Yours Now!

Making a charitable donation in place of physical gifts is a worthy tradition in some families. That’s where gift aid donations come in. By making gift aid donations, you won’t need to quietly dispose of as many items. Moreover, you and your chosen charity can claim tax relief in the form of Gift Aid.

Let’s dig a little deeper…

How Gift Aid Donations Work

Most charities make Gift Aid declarations very easy. To do this, you simply tick a box to say that you are a UK taxpayer. Then, you need to confirm that you pay income tax and or capital gains tax (Please note, these need to be at least equal to the 20% tax treated as deducted from your donation for the tax year of the gift). You also need to remember to record the date and amount of the gift aid donations. Finally, you need to include them on your self-assessment tax return for the year in which you made the donations.

Where you are a higher rate taxpayer, declaring a Gift Aid donation on your tax return will provide you with tax relief. This is calculated as the difference between the highest tax rate you pay and the basic rate.

Let’s Take a Look at an Example…

Anne makes Gift Aid donations of £100. The charity reclaims Gift Aid to make the total donation worth £125. As Anne pays 40% income tax, she can personally claim back 20% of the gross donation. That is £25 (£125 x 20%). In practice, this tax relief extends the basic rate band.

You can also choose to carry back Gift Aid donations to the previous tax year. This only applies if you make the donation before you submit the tax return for that year. If you make a donation now, it can be treated as if it were made in the tax year 2020-21 if you have not submitted your 2020-21 tax return.

Get More Tax Planning Tips From Newnham & Son

Gift aid can be a very useful tax planning idea. With this in mind, please let us know if you make any donations so that we can include them in your tax return.

For more information, or to ask any questions, please contact our team at Newnham & Son. Our friendly team will be happy to assist you with all your personal and business tax planning needs.