Gift Aid
A scheme that allows charities to reclaim basic rate tax on your donations, increasing their value by 25% at no extra cost to you.
Key Points
- ✓Charity claims 25% extra from HMRC on your donation
- ✓Higher Rate Tax payers can claim additional 20% relief
- ✓Additional Rate Tax payers can claim additional 25% relief
- ✓Must pay enough UK tax to cover the Gift Aid claimed
- ✓Cannot be used for purchases or donations with returns
Detailed Explanation
Gift Aid is a government scheme that allows charities to reclaim the Basic Rate Tax you've already paid on your donations. For every £1 you donate, the charity can claim an extra 25p from HMRC.
When you make a Gift Aid donation, the charity treats your donation as if it was made after 20% tax was deducted. So a £80 donation is treated as £100 gross, and the charity claims back the £20 tax.
If you're a Higher Rate Tax or Additional Rate Tax payer, you can claim additional tax relief through your Self Assessment tax return. A £100 gross donation (£80 to you) allows a Higher Rate Tax payer to claim back an extra £20.
To use Gift Aid, you must pay at least as much UK Income Tax or Capital Gains Tax as all the charities will reclaim on your donations. If you don't pay enough tax, you could end up owing money to HMRC.
Gift Aid can be applied to one-off or regular donations, though not to purchases (like charity shop items) or donations where you receive something in return (unless it's of negligible value).
Practical Examples
- •You donate £80 with Gift Aid: Charity claims 25% (£20) from HMRC = charity receives £100 total
- •Higher Rate Tax payer donating £100 gross: Get £20 additional relief through Self Assessment, net cost £60
- •Additional Rate Tax payer: £100 gross donation costs £55 net (£45 tax relief = £20 basic + £25 higher/additional difference)
Frequently Asked Questions
Related Terms
Income Tax
A progressive tax on your earnings, charged at 20%, 40%, or 45% depending on your income level (after personal allowance).
Basic Rate Tax
Income Tax charged at 20% on income between £12,571 and £50,270 (2024/25).
Higher Rate Tax
Income Tax charged at 40% on income between £50,271 and £125,140 (2024/25).
Additional Rate Tax
The highest Income Tax band in the UK, charged at 45% (47% in Scotland) on income over £125,140.
Self Assessment
The system for reporting income and paying tax if you're self-employed, have untaxed income, or earn over £150,000.