NEWS

Gift Aid Tax Tip for Higher Rate Taxpayers

Often overlooked is the opportunity for higher rate taxpayers to claim additional tax relief on their donations to charity.

Under the Gift Aid scheme, charities may reclaim basic-rate tax from donations received from UK taxpayers.  As an illustration of how the scheme works let’s say a donor makes a charitable donation of £100.  As the donation is deemed to have paid under the deduction of basic-rate income tax of 20%, the charity can reclaim £25 from HMRC (ie £100÷80 x 20).

For a basic rate taxpayer the tax rate claimed by the charity is equal to the income tax rate paid by the donor. However, if the donor is a higher rate taxpayer, the difference between the higher rate of income tax of 40% and the basic rate of 20% already claimed by the charity can be claimed by the donor.

Additional rate taxpayers at 45% will get relief on the difference between the basic rate and their additional rate.  Simply put this means a donation worth £125 to a charity would cost the donor £68.75.

It is therefore important to keep a record of charitable gift aid payments to ensure the correct tax relief is claimed.

10/01/2018