Gift Aid is a tax relief for individuals which enables them to give the income tax or capital gains tax that they pay directly to a charity on top of their donation. In effect it adds 25p for every £1 donated to a charity. Gift Aid is an important tax relief worth £1.3 billion to the charity sector.
This year’s Gift Aid Awareness Day is taking place on Thursday 7 October 2021. Charity Finance Group (CFG) is asking UK-based charities, small, medium and large, to spread the “#TickTheBox” message far and wide on 7 October 2021. CFG have produced a 2021 campaign pack for use, which includes logos, posters, infographics and a banner.
Gift Aid and tax relief
Where possible higher rate taxpayers should “Gift Aid” any payments to charity to provide additional benefit to the charity and for the individual to obtain additional tax relief on the payment.
For example, where an individual makes a £20 cash donation to charity the charity is able to reclaim a further £5 from HMRC making a gross gift of £25. Where the individual is a 40% higher rate taxpayer he or she is able to claim a further £5 tax relief under self-assessment, reducing the net cost of their donation to £15.
Note that the donor is required to make a declaration that they are a UK taxpayer and those that have not suffered sufficient UK tax to support the Gift Aid amount will taxed on the shortfall.
Remember that Gift Aid does not just apply to gifts of cash. Many charity shops will now sell the donated items on your behalf and are able to treat the sale proceeds as Gift Aided donations.
It is also possible to gift quoted securities and land and buildings to charity and claim Gift Aid on the market value of those assets.
Please feel free to contact us if you are considering taking advantage of this exemption. Our tax specialists at Beavis Morgan are available to assist you in keeping the necessary records to satisfy HMRC.