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Gift Aid is tax relief on money donated to UK charities. For a donation to be eligible for Gift Aid, the donor must be resident in the UK and be a current UK tax-payer. The charity can then reclaim this tax to increase the value of a donation.
Gift aid rules
- pay enough UK income tax and/or capital gains tax themselves to cover the amount of tax the charity will reclaim
- give the charity a Gift Aid Declaration, which should include
- their name
- their home address
- the charity’s name
- details of the donation – saying that it is a gift aid donation
- confirmation that they have paid UK tax – to cover the tax the charity will reclaim
Donors who are liable at the higher rate of income tax can, additionally, claim tax relief for the difference between the higher rate and the basic rate of income tax using Self-assessment forms.
A declaration can be made to cover individual donations, a series of donations, donations made during a specified period or to cover all future donations. They can also be backdated for up to 6 years prior to the date of the declaration provided the donation was made since 6 April 2000.
Basic Rate of Tax
As from 6 April 2008, the basic rate of tax changed to 20 per cent. For donations made on or after 6 April 2008, the calculation for repayment of tax by Gift Aid can be arrived at by multiplying the total donations by 20 and dividing by 80.
This means that Gift Aid repayment by HMRC declared by basic-rate taxpayers works out at 25p for every £1 Gift Aid donation received.