Gift Aid Relief

Gift Aid Relief

If you claim gift aid relief when making a charitable donation then the charity can claim 25% tax back. But beware, if you have not paid enough tax in the year, HM Revenue & Customs can demand the tax from you!

For couples to maximise relief, make sure that whoever pays the highest rate of tax makes the donation.  Remember that relief is available on the net gift.  So a gift of £800 would be treated as a gross contribution of £1,000.

Remember to keep records of the donations to claim higher rate tax relief and don’t forget that some entry fees to zoos, museums etc. can include a gift aid donation.

Gift aid can be carried back to the previous year. This can, in some circumstances, mitigate the loss of personal allowances, child benefit and accelerate a tax repayment. There are two conditions:-

  • Firstly, you cannot claim to carry back gift aid donations once your previous year’s return has been submitted. This means the latest date to action a claim to carry back donations made in 2019/20 to offset your taxable income in 2018/19 is 31 January 2020.  If you are making large donations and the level of your taxable income fluctuates from year to year, it may therefore be beneficial to defer filing your tax return to 31 January and ensure your donations are made by that date.
  • Secondly, you will need to have paid enough tax to cover the tax that the charities reclaim.

For higher rate tax payers, especially if taxable income exceeds £100,000, this strategy is a useful device.  In fact, this is the only readily accessible carry-back planning tool available to most taxpayers.

If you wish to discuss this further please contact Wendy Burden: wendy.burden@kilsbywilliams.com.