Taxable income over £50k? Why a Gift Aid declaration isn’t enough

You’re probably aware of the Gift Aid scheme, under which UK charities can claim back an amount equal to the 20% basic rate tax paid by a donor.  

A donor must pay enough income or capital gains tax to cover all Gift Aid reclaimed on their charitable donations in the tax year. A donor must also give a Gift Aid declaration, in which they provide their personal details and confirm that they pay sufficient tax.

However, if you have taxable income of more than £50,270, your Gift Aid declaration is not the end of the story.  You pay tax at 40% (higher rate) on income over £50,270 and 45% (additional rate) on income over £125,140.  Yet the charity can still only claim relief at 20%, so what happens to the extra tax you’ve paid?

Personal Gift Aid reclaim

The answer is that you can reclaim this extra tax personally.  This personal relief is worth 25p/31.25p for every £1 a higher/additional rate taxpayer gives, so it can be very valuable and might enable you to be even more generous in support of your favourite cause.

If you’re a Scottish taxpayer, the personal reclaim starts at an income of over £26,561 and can reach 35p per £1 you’ve given. 

Interaction with Child Benefit

If you’re a parent with taxable income over £60k, your giving can help to preserve your entitlement to Child Benefit, so that the effective cost of giving might be lower than you think.

Stewardship makes it easy

HMRC’s own research shows that most higher/additional rate Gift Aid goes unclaimed, because donors are either unaware of this personal relief or think it is too difficult to claim.

If you give with Stewardship, we make it easy.  Simply sign in to your account, select ‘Activity’ from the menu at the top of the page, click the ‘Gift Aid’ tab, select the relevant tax year and note the ‘total’ and ‘one-off’ figures. Then turn to the charitable giving section of your HMRC Self Assessment return, insert the ‘total’ figure into the ‘Gift Aid payments made in the tax year’ box and the ‘one-off’ figure into the ‘Total of any one-off payments’ box below.

If you’re committed to regular giving, you can even ask HMRC to change your PAYE tax code to take account of your higher/additional rate relief, so that you pay less tax during the year rather than reclaiming a lump sum at the end.  By making regular gifts into your Stewardship Giving Account or Donor Advised Fund, you can build a balance ready to support one-off appeals as well as regular donations to our Charity Partners.  One note of caution however – if your circumstances change and you have to reduce your giving, be sure to contact HMRC straight away so that you don’t receive a bill for underpaid tax when you next file a return.

Taxable income of £100k+?

If you have taxable income of £100k or more there are further tips.

Use a Giving Account to organise all of your giving

The Stewardship Giving Account makes it easy to keep track of all your giving so that you can quickly find the right numbers for your tax return and ensure you reclaim all of your higher rate Gift Aid.

Open an account

Stewardship may provide general guidance about charitable giving for information purposes only. We do not offer tax, legal or investment advice and you are encouraged to seek advice from a qualified professional on your specific situation.