What are the rules for claiming tax relief on Gift Aid donations?

Gift Aid is a UK government scheme that allows charities to reclaim the basic rate of tax (20%) on a donation made by an eligible taxpayer. For the donor, it increases the value of their donation without any extra cost to them.

### Donor Eligibility

To qualify for Gift Aid, the donor must pay enough UK Income Tax and/or Capital Gains Tax in the relevant tax year to cover the basic rate tax (20%) reclaimed by the charity on the total amount donated under Gift Aid that year.

• Example: If you donate USD 100 under Gift Aid, the charity reclaims USD 25 (20% of USD 125). You must have paid at least USD 25 in tax that year.

### Higher and Additional Rate Relief

If you are a higher rate (40%) or additional rate (45%) taxpayer, you can claim further relief on the donation via Self-Assessment. This relief is the difference between the tax you paid and the basic rate tax claimed by the charity.

• Higher Rate Taxpayer (40%): You receive 20% relief on the grossed-up donation (20p for every pound donated).
• Additional Rate Taxpayer (45%): You receive 25% relief on the grossed-up donation.

Example (Higher Rate): You donate USD 100 (Grossed-up value USD 125). The charity claims 20% (USD 25). Since you pay tax at 40%, you are due an additional 20% relief (USD 25). The total tax benefit to you is USD 50 on a USD 100 donation.

### How to Claim

• Charity Action: The donor must confirm to the charity that they wish the donation to be treated as Gift Aid.
• Self-Assessment: Higher or additional rate taxpayers must declare the total value of their Gift Aid donations in their Self-Assessment tax return to claim the additional relief.

### Important Notes

• Gift Aid Tax Bands: When calculating your income tax bands, the grossed-up amount of your Gift Aid donations is treated as income. This can sometimes push you into a higher tax bracket, but the benefit of the additional relief usually outweighs this effect.
• No Relief: If you pay no tax in a given year, you should not make a Gift Aid declaration, as the charity will be unable to reclaim the tax, and you may be asked to repay the difference to HMRC.