Gift aid, tax and tax credits

johnnyl

Hi all, unsure if this is the correct place to put it, but here goes.

I am in the fortunate position where I will be making extra contributions to a pension from my salary (PAYE not self employed etc). When making a pension contribution, I am shielded from the tax I would have paid, plus it will reduce my income such that any tax credit claims would be greater - all done effectively through my standard pay packet.

Recently, I have found a particular cause that I would like to make a decent sized donation to, and reduce the amount that I will put into my pension to compensate for this. It will be made via Just Giving. The questions I have is as follows.

1) If I pay through the just giving website, am I likely to be able to claim the tax back?

2) If so, would I pay out of cash and claim back or direct from wages?

3) If it is claimed back, is this immediate or the end of the year as a declaration?

4) For tax credits purposes, would my salary look the same as if I had put it into the pension?

5) If so, how does that work? Is that through a declaration or will my pay slip sort that out.

6) I work in a consultancy role and so will be making other tax claims for mileage etc etc....does all this need rolling into 1 thing or are they different claims?

Thanks for any help.

zagfles

johnnyl wrote: »

Hi all, unsure if this is the correct place to put it, but here goes.

I am in the fortunate position where I will be making extra contributions to a pension from my salary (PAYE not self employed etc). When making a pension contribution, I am shielded from the tax I would have paid, plus it will reduce my income such that any tax credit claims would be greater - all done effectively through my standard pay packet.

Recently, I have found a particular cause that I would like to make a decent sized donation to, and reduce the amount that I will put into my pension to compensate for this. It will be made via Just Giving. The questions I have is as follows.

1) If I pay through the just giving website, am I likely to be able to claim the tax back?

Only if you pay higher rate tax. The charity gets the basic rate relief - eg you donate £80 with gift aid, the charity claims £20 from HMRC.

2) If so, would I pay out of cash and claim back or direct from wages?

Your employer might offer payroll giving, in which case you'd donate £100 and your income would reduce by £100, and the charity would get the same as above. You'd save tax and NI on the £100.

3) If it is claimed back, is this immediate or the end of the year as a declaration?

Tax return, but as above there's nothing to reclaim if you pay basic rate tax.

4) For tax credits purposes, would my salary look the same as if I had put it into the pension?

Only if you use payroll giving. Your employer might not offer it or might restrict which charities you can support.

5) If so, how does that work? Is that through a declaration or will my pay slip sort that out.

If you pay direct eg JustGiving, you'll need to deduct it from your income. Google TC825. Make sure you keep receipts - tax credits are likely to query the difference between your declared amount and the the RTI amount they get off your employer.

6) I work in a consultancy role and so will be making other tax claims for mileage etc etc....does all this need rolling into 1 thing or are they different claims?

You can claim employment expenses on a tax return and also deduct them from income for tax credits, but be sure they're allowable expenses and keep copies of expense claims etc.

johnnyl

Thanks

I am a 40% tax payer, so as I understand it if I gift aid a quantity I will only be the 20% worse off than what I had planned to do by shoving everything in my pension.

The remainder (20% tax, and Tax Credits) can be altered at a later date as a worst case.

If my company did offer a direct payment from wages, does this alter any of that (ie - save the remaining 20% tax?)

Its not a deal breaker by any means, I just want to calculate accurately what I can afford to give to charity.

Thanks again

zagfles

If you can do payroll giving it comes straight out before tax so everything is taken care of, you don't have to do anything else. For tax credits just declare your P60 which will have had the payments deducted already.

If you use gift aid then you need to claim the tax relief and deduct the grossed up amount for tax credits see form TC825.

To give the same amount, £100 in payroll giving is the same as £80 in gift aid - the charity gets £100 and your taxable/tax credits income is reduced by £100.