What is Gift Aid?

Gift Aid allows charities to reclaim the basic rate tax you have already paid on the money you donate. This means that donations can be worth an extra 25p for every £1 donated, at no extra cost to the donor.

How does Gift Aid work?

Gift Aiding a donation is extremely simple for the donor and charity. 

The donor completes a declaration form confirming they pay enough tax to cover what the charity will reclaim from HM Revenue & Customs.  If you are a higher rate tax payer, you can also claim back the difference between basic and higher rate tax. 

The charity processes the donation, completes a claim form and reclaims the basic rate tax from the Inland Revenue.

Does signing a Gift Aid declaration commit the donor to anything?

The declaration does not signal a commitment from the donor to make any further donations to that charity but it ensures that if they do the charity will have the paperwork already completed and signed.  Furthermore, if the donor has made donations to the charity in the past (up to 6 years previous) then Gift Aid can be reclaimed back on this (assuming the donor was eligible).

How does a donor qualify?

For every £1 the donor gives to the charity in any financial year, they must have paid 25p in income or capital gains tax in the same year.

If the donor has not paid the equivalent amount of tax then the charity is unable to claim the tax relief.

How can charities claim back 25p when basic rate is 20%

A donation for £1 is treated as the net after tax from £1.25 - £1.25 minus 20% is £1.00. 

Furthermore, up to 5th April 20111, charities can claim back a "transitional relief" amount to make the tax reclaim up to 28p for every £1 donated.  This was introduced when basic rate of tax reduced from 22 per cent after 5 April 2008.

What donations are eligible for Gift Aid

In order to qualify to claim Gift Aid, the donation made to the charity must take the form of a payment of a sum of money which is not subject to a condition.

There are certain exemptions such as gifts of assets to a charity, which are not eligible for Gift Aid.

Can sponsored events attract Gift Aid

Yes, in most cases a sposored event will be eligible for tax relief.  There are two ways that the tax can be claimed back; either by the sponsored person or by the individual sponsors.