Gift Aid is a UK scheme that lets charities reclaim tax you've already paid on your donation. Here's the breakdown:
How it works:
1. You donate: You make a donation to a registered charity.
2. Declare Gift Aid: You tell the charity you want Gift Aid to apply to your donation. This is usually done through a form or online declaration.
3. Charity claims back tax: The charity reclaims the basic rate of tax (currently 20%) on your donation from HMRC.
4. Increased donation: Your donation is effectively boosted by 25% (the 20% reclaim plus the original 5%).
Example:
You donate £100 to a charity and declare Gift Aid.
* Your donation: £100
* Gift Aid reclaimed by charity: £20 (20% of £100)
* Total donation: £120
Who can claim Gift Aid?
* You: You must be a UK taxpayer and pay enough Income Tax or Capital Gains Tax to cover the amount of Gift Aid claimed.
* The charity: The charity must be registered with HMRC and be able to claim Gift Aid.
Benefits:
* Larger donations: Your donations go further as the charity receives an extra 25%.
* Tax benefits: While the charity benefits from Gift Aid, you don't get any direct tax relief, but you do get the satisfaction of knowing your donation has been boosted.
Things to keep in mind:
* Donations backdated: You can only claim Gift Aid for donations made in the last four years.
* Gift Aid on recurring donations: Gift Aid can also apply to regular donations like monthly standing orders.
* Non-cash donations: Gift Aid can also apply to some non-cash donations, like gifts of shares.
* Gift Aid on events: You can claim Gift Aid on donations made at events like fundraising dinners or concerts.
To find out more about Gift Aid, you can visit the HMRC website or contact the charity you wish to donate to.