Tax Action tips: Gift Aid Relief

First published 11 March 2013 • Updated 25 July 2017

Tax Action 2013 sponsors TaxCalc explain in their Tax Action tips blog why it can pay to include your charitable donations in your tax returns…

When it comes to making donations to charity via the gift aid scheme, the charity you donate to will receive an additional payment of basic rate tax from HMRC.  So if you donate £100 to a charity they will receive an additional £20 from HMRC (20% tax rate) making the total donation worth £120.

What many people paying higher rates of tax may not realise is that they can benefit from tax relief on donations too.  By declaring any charitable Gift Aid donations you make on your self-assessment tax return, you can claim relief equal to the difference between the higher rate of tax at 40% or 50% and the basic rate of tax at 20% on the total value of the donation.  So if you donate £100 to a charity, your total contribution is £120.  If you are currently paying tax at 40% (higher rate) or 50% (additional rate) you can claim relief of 20% or 30% of the £120 meaning you will save either £24 or £36, depending on your tax rate.

Please note that the additional rate tax band will be reducing to 45% from 50% for the 2013/14 tax year.

About the author
Nick Green
Nick Green
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.