Gift Aid - Questions donors may have

Gift Aid is important for charities and means millions of extra pounds goes to the charity sector rather than staying with HMRC. But your donors may have questions around how Gift Aid works. Use the following as a guide to help inform your donors.

What is Gift Aid? 

Gift Aid is a government scheme that allows charities to claim additional funds— boosting each donation without costing donors a penny extra.

When a registered charity or Community Amateur Sports Club (CASC) receives a donation from a UK taxpayer, the charity is entitled to claim an extra 25% paid on that donation from HMRC.

This means a £10 donation processed with Gift Aid becomes a £12.50 donation to a donor's chosen charity!

Am I eligible for Gift Aid? 

You are eligible if:

• you are a UK taxpayer
• the tax you pay that year is at least equal to your donations to charity.

I'm retired 

You can Gift Aid donations if you pay income tax or capital gains tax, provided you have paid enough tax during the year to cover the amount we are reclaiming on your donations.

If you live on your pension alone and don't pay tax, you won't be eligible.

I'm a higher rate taxpayer 

If you pay a higher rate of tax (40% or above), you can claim the difference between the higher and basic rate on the total value of your donation. Individuals can claim the additional tax relief through their self-assessment tax return or by asking HMRC to amend their tax code.

To receive the additional tax relief you must:

• Include all your Gift Aid donations on your Self-Assessment tax return
• Ask HM Revenue and Customs to adjust your tax code

Example for higher rate taxpayer

You donate £100 to charity – the charity claims Gift Aid to make your donation £125. You pay 40% tax so you can personally claim back £25.00 (£125 x 20%).

I’m unemployed

Even if you are not currently employed you are eligible to make Gift Aid payments so long as, at some point in the tax year in which you make the donation, you pay enough tax on any of the following:

• Personal or occupational pension
• Stocks or shares
• Bank or building society savings accounts
• Rental income
• Overseas or UK investment dividends

What information does a charity ask for? 

There is no standard format for the Gift Aid declaration, but it should contain a space to describe your gift and who will receive it. For example:

“I want to Gift Aid my donation of £______________ to: Name of Charity/CASC”

The declaration will also ask for the:  

• donor’s full name
• donor’s home address (at least their house number or name and postcode)

The declaration should also include a statement that the donor (you) has paid the same amount or more in Income Tax or Capital Gains Tax in that tax year. For example:

“I am a UK taxpayer and understand that if I pay less Income Tax and/or Capital Gains Tax in the current tax year than the amount of Gift Aid claimed on all my donations it is my responsibility to pay any difference.”

It's important that you let a charity know if you stop paying tax or if you change your name or address, so that they can update their records.

Is my donation eligible? 

Gift Aid can be claimed on donated items and money provided they are gifts. As a UK taxpayer, you can claim as an individual on:

• One-off or monthly cash donations 
• Donate goods to charity shops 
• Personal donations made in celebration or memory
• Donations to sponsored events

What donations are not eligible?

Certain donations are not eligible for Gift Aid.

Fundraising events that require purchasing tickets (e.g., prize draws, raffles, tombolas) 

When it comes to Gift Aid, the only way for donations from fundraising events to qualify is if any payments made by the attendees are completely voluntary.

If you have to make a donation in order to attend the event, for example to purchase a ticket or slice of Victoria sponge, then the payments are not optional and therefore do not qualify for Gift Aid.

This is because the donations are seen as payments being placed in return for something else.

Donating goods 

This process is exclusive to charity shops that operate a retail Gift Aid scheme to sell goods on behalf of donors. To maximise the amount raised, charities can sell valuable or collectable items donated to a shop. This can be at a commercial public auction or an online auction website.

Money raised by selling donated goods like clothes does not qualify for Gift Aid. The charity must explain to owners of donated items that the shop, auction or website will act as their ‘agent’ to sell goods on their behalf if the owner will give the sale proceeds (minus any commission charged) to the charity as Gift Aid donation. Some charities will ask you to complete a declaration for to this end which may include other information relevant to the specific charity.

Hubs

• fundraising