• John Massey

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

Updated: Jul 23, 2021

How Gift Aid works

When giving to charity you’ll often be asked to tick the “Gift Aid” box to boost the value of your donation. In doing so you’re authorising the charity to reclaim the 20% Income Tax that you paid when you first earned the money you’re giving.

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

However, whether this is a good idea or not will depend on your personal circumstances.

Should you donate via Gift Aid?

YES ✅ for Basic rate taxpayers (those earning approx. £14,000 - £50,000) – your usual tax bills will cover any tax reclaimed by the charity.

YES ✅ for Higher rate taxpayers (those earning over £50,000) – in fact the charity will reclaim it’s usual 20% + you’ll be able to reclaim a further 20% tax deduction on completion of your Self-Assessment Tax Return.

DEFINITELY YES ✅✅ for High earners (those earning £100,000 - £125,140) –– in this case the charity reclaims it’s 20% + 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. This is because 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 can catch-out a surprising number of people that organise their affairs to pay less tax 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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