Gift Aid

If you pay taxes in Britain, then an easy way to increase the value of a donation to charity is Gift Aid, which allows the charity to reclaim the tax that was levied on your donation.

How Does Gift Aid Work?

When an individual makes a donation, that donation is regarded as an after tax donation, since in the UK most income tax is levied at source. Charities therefore have the right to reclaim the tax paid on the amount that was donated, or simply put are entitled to receive the gross pre tax donation. This is calculated at a basic rate of 22 per cent.

So for example if you donated £10 to a charity, under Gift Aid, that donation is really worth £12.82, since 22 per cent of £12.82 is equal to £2.82, and the initial £10 donation representing the net after tax donation.
Gift Aid can only be used for monetary donations or gifts, and there are rules that govern the value of benefits charities or individuals can claim under the scheme.

Who Is Allowed To Use Gift Aid?

Anyone is eligible to claim under the Gift Aid scheme, provided they have paid tax in the financial year they are claiming in. The amount paid must also be equal to the amount that the charity is claiming back on the individual’s behalf.

If you wish to do calculate your claimable amount, simply multiply the amount you donated by 0.282 (22 divided by 78).

This means if you donated £100 to a charity, then under Gift Aid, the charity has the right to claim £100 X 0.282 which is equal to £28.20. However in order for the charity to eligible to do this under Gift Aid, the donor must have at least paid £28.20 in taxes during the financial year that the donation was made.

What Is The Calculation For Donors On Higher Tax Rates

If for example the donor is paying tax at the higher rate of 40 per cent, they have the right to claim the difference between the 40 per cent rate and the 22 per cent rate basic rate on the pre-tax gross value of the donation.

Using the previous example, the charity can therefore reclaim a larger rebate of £23.08 (calculated as a further 18 per cent of the gross donation of £128.20).

  • Non taxpayers are not eligible to claim under Gift Aid.
  • If you do not pay tax, you should not use Gift Aid.

How To Claim Using Gift Aid

Whenever an individual makes a donation to a charity, the charity will normally ask the donor to consider making the donation under the Gift Aid Scheme, and will provide the donor with a simply form declaring that the donor wishes to do so.

Donor’s need to complete separate forms for individual charities they donate to, however if they make multiple donations to a single charity, the same from can be used to cover every donation made to that particular charity.