Gift Aid is the main vehicle for tax efficient giving to charities. It applies to any donation whether large or small, regular or one-off.
Simply by confirming that they are taxpayers, donors can ensure that their chosen charities can reclaim the basic rate of income tax on all their donations, equal to 25% of the amount donated.
This confirmation has only to be completed once for each charity (it can even be done by telephone or internet) and remains valid for as long as the donor remains a taxpayer.
As an added boost for donors, higher rate taxpayers can claim for themselves the difference between basic and higher (currently 20%) or additional (currently 25%) rates of tax against their own income tax liabilities, reducing further the net cost of the donation. This relief may be carried back to reduce the tax payable for the previous tax year.
Example
| You give to charity |
£1,000
|
| Charity reclaims tax |
£250
|
| Total value of your gift |
£1,250
|
Tax reduction for higher rate taxpayer £250 and for additional rate taxpayer is £312.50.
So a gift worth £1,250 to the charity could cost you as little as £687.50.