The Gift Aid scheme is for gifts of money by individuals who pay UK tax.
How does Gift Aid work?
When a UK taxpayer gives a gift of money to a charity, they have already paid tax on that money. Because charities are generally exempt from tax, they can claim an amount from HMRC equal to the tax paid on that money by the donor. This repayment from HM Revenue & Customs (HMRC) is known as Gift Aid.
As a taxpayer, you’ll already have paid tax on any money you donate to charity. When you donate, the charity will ask you whether you want donate through Gift Aid – if you do, they’ll be able to claim back the tax you originally paid at the basic rate of 20%.
You earn an income of £125 and £25 tax is deducted from this at the basic rate of 20%. This leaves you with £100. You then donate the £100 to charity through Gift Aid.
The charity can claim an extra £25 (the tax you paid at basic rate) from the government to make your total donation £125.
In order to make a Gift Aid donation you’ll need to make a Gift Aid declaration. The charity will normally ask you to complete a simple form – one form can cover every gift made to the same charity or CASC for whatever period you choose, and can cover gifts you have already made and/or gifts you may make in the future.
A Gift Aid declaration must include:
- your full name
- your home address
- the name of the charity
- details of your donation, and it should say that it’s a Gift Aid donation