With the festive period on the horizon, many people will be turning their attention to how they can make donations to charity. If you, like many, opt for a festive card design that supports a charity, did you know that you could also donate via Gift Aid? Donations made under Gift Aid means the charity can claim basic rate tax relief back from HMRC.
If a donation to a registered charity in the UK is made under Gift Aid, it means that the charity can claim some funds from the UK tax authorities.
When you complete your tax return you gross up the Gift Aid payments and if you pay tax at a rate higher than 20%, you can claim tax relief via your tax return.
1 The 60% rate of tax is implacable for those with income falling in the band £100,000 to £125,140.
If you are not a UK taxpayer or pay tax less than the amount claimed back by the charity then you will need to pay HMRC the difference.
Usually you will need to sign a declaration to the charity which says that you are UK resident and pay tax in the UK and this will often involve ticking a box.
If you are donating to charity in the forthcoming weeks, are UK resident and pay tax of more than 25% of the donation you are planning to make, then consider making the payment under Gift Aid.
The charity benefits and if you pay tax at more than 20% you will also benefit, if you include the payment on your tax return - a win-win for both you and the charity.
As a result of the pandemic many charities have suffered from a reduction in donations and it is key that donations they receive are made in a tax efficient way. Always remember when making donations to tick the box.
If you would like more information on the issues discussed in this article or to discuss your individual circumstances, get in touch with Nicky Owen or your usual Crowe contact.
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