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  • Writer's pictureJohn Massey

Charitable Donations – Should you tick the “Gift Aid” box? ✅

Updated: May 30, 2023

How Gift Aid works

When giving to charity, you might be asked if you want to boost the value of your donation using Gift Aid. In doing so, you’re authorising the charity to reclaim the 20% Income Tax that you're presumed to have already paid on that money.

This means that a £100 donation becomes £125 in the hands of the charity (i.e. £100 of previously taxed income / 0.8 = £125).

If this is a good idea or not depends on your personal circumstances.

Should you donate via Gift Aid?

PROBABLY YES ✅ for Basic rate taxpayers (earning approx. £20,000 - £50,000). The key to making this a definite "yes" is knowing that your charitable donations will be no more than four times your tax bill for the year.

YES ✅ for Higher rate taxpayers (earning over £50,000). The charity will reclaim its usual 20% and you’ll be able to reclaim a further 20% tax deduction on completion of your Self-Assessment Tax Return.

DEFINITELY YES ✅✅ for High earners (earning £100,000 - £125,140). In this case the charity reclaims its 20% and you get 40% relief via your Self-Assessment Tax Return (this due to what would otherwise be the tapering of your Personal Allowance by £1 for every £2 earned above £100,000)

NO / PROBABLY NOT ⛔ for those earning under / near to the Personal Allowance of £12,570. To explain - If a non-taxpayer uses Gift Aid, but ends up paying no tax that year, then the tax reclaimed by the charity actually becomes payable by the taxpayer on the Self-Assessment Tax Return! This subtle trap catches out a surprising number of people such as partners of Partnerships or small limited company directors.

Would you like help to pay less tax? Feel free to get in-touch or check-out our related posts 👇

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