are you eligible for higher rate tax relief?

By Kevin Russell | 9 December 2014

Gift Aid donors who pay tax at the higher (40%), or additional (45%) rate of income tax can claim a personal repayment of tax from HMRC, equal to the difference between their highest rate of income tax and the basic rate of tax.

 

It seems that there are quite a few people who either do not know that they can claim this, or think that it is too complicated.

 

And yet, all it takes for PAYE taxpayers is a telephone call to your tax office!

 

Example:

Fred is employed and earns £50,000 p.a. He therefore pays income tax under PAYE, at 40%. He decides to give £4,000 p.a. into a Stewardship giving account – on which Stewardship reclaims £1,000 under the Gift Aid Scheme, into his account. He therefore now has £5,000[1] in the account, over which he can make gift requests to benefit his church and his other favourite charitable causes.

 

Fred’s gift of £4,000 is a net gift for tax purposes. Stewardship reclaims £1,000 of basic rate tax already paid by Fred, making the gross gift value up to £5,000.

 

Fred is therefore allowed total tax relief of 40% on the gross gift (£5,000) which comes to £2,000. But Stewardship has already claimed £1,000 of this. Therefore Fred can personally reclaim the other £1,000:

 

Total tax repayments due:                                                       £2,000

 

Repaid into the Stewardship Giving Account:                             £1,000

Now repayable to Fred:                                                            £1,000

                                                                                             £2,000

 

 

How to claim your personal repayment

Fred simply needs to telephone his usual Tax Office and tell them about the gift(s). They will need a few personal details in order to adjust the right person’s tax record but that is all – Job done!

 

Self employed taxpayers can also claim. They simply need to fill in the relevant boxes for charitable giving when completing their usual self assessment tax return and the repayment will be factored into their overall tax calculation.

 

You can stretch your charitable giving!

 

Once you have your repayment, why not consider giving some, or all of it, to charity as well? And if you also do that under Gift Aid, it will generate a further repayment[2]

 

Of course, the examples above work whether the charitable gift is to Stewardship, or to any other charity.



[1] For the purposes of this example, this ignores the membership deduction made by Stewardship.

Posted by Kevin Russell

Our Legal Eagle guru and Stewardship's Technical Director, Kevin constantly has his finger on the pulse of all things tax and charity law-related. His briefing papers for charities, churches and individuals are an invaluable resource on everything from VAT to Gift Aid. 

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