How to give more to charity
Pay income tax? Then boost your donations through Gift Aid, suggests Paul Lewis
If you’re thinking of making a gift to charity this Christmas, then why not get Rachel Reeves to chip in, too? Everyone who pays income tax can get their gift boosted by 25% if they agree to Gift Aid it. That gives you tax relief on your gift and then passes it to the charity.
So if you give £10, for example, out of your taxed income, the tax relief is £2.50 (because to have £10 left after tax at 20%, you must have earned £12.50). You give the charity your £10, and they then claim from HMRC the £2.50 the tax collector’s already taken off you. All you have to do is declare you are a taxpayer and give your name and address or email.
Free guide to saving Inheritance Tax
Pensions - calculate ow much you could get with the Annuity Calculator
Anyone who pays UK income tax or capital gains tax can Gift Aid their donation. If your income is below or close to the tax-free threshold of £12,570 then you cannot use Gift Aid, as your gifts must not total more than four times the amount of tax you have paid in that tax year. If you have a partner who does pay tax, give them the money and they can donate it through Gift Aid.
If you pay higher rates of tax you can reclaim the extra tax relief yourself. If you fill in a self-assessment form then it can be done through that. If your income comes from wages or a pension you can tell HMRC and ask it to adjust your tax code – you will need a Government Gateway account. Search gov.uk for “gift aid higher rate tax”.
Alternatively, if you want the charity to have the extra tax relief then give a little more. For example, if you pay 40% tax and want to give an amount that will cost you £100 after reclaiming the tax relief, then give the charity £133.33. The charity gets an extra £33.33 through Gift Aid, making a total of £166.66, and you reclaim the higher rate tax of £33.33 you have paid so it only costs you £100. Scotland has different tax rates so the arithmetic is slightly different.
Charities can claim the Gift Aid automatically on donations under £30 given in cash. But always check the credentials of people out at Christmas with a tin or a bucket before giving them your money.