Tax relief on charity donations

JennyP

Can someone please explain to me how tax relief on charitable donations actually works, as I am tipping into the 40% tax bracket for the first time, though only slightly. Have I understood it correctly?

Say I gave £100 to charity and ticked giftaid. The charity then claims 20% back so they actually get £120. Now I'm a higher rate tax payer, am I right in thinking that if I put it on my tax return, I would get tax relief of £20 too? So making a donation of £100 would lower my tax bill by £20?

xylophone

https://www.gov.uk/donating-to-charity/gift-aid

Bluebirdman_of_Alcathays

It's actually £25.


Personally I would rather just keep the £100.

JennyP

Bluebirdman_of_Alcathays wrote: »

It's actually £25.


Personally I would rather just keep the £100.

What's exactly £25?

Have read the government website already.

Bluebirdman_of_Alcathays

Struggling to believe you'd read the government website - the £100/£25 explanation is on the page xylophone linked to.

JennyP

Bluebirdman_of_Alcathays wrote: »

Struggling to believe you'd read the government website - the £100/£25 explanation is on the page xylophone linked to.

Struggling to believe it's so difficult to get an answer to my question. Instead you just unhelpfully comment that you'd keep the £100. Some of us are more generous!

Stevie_Palimo

If you are a higher rate tax payer Jenny then yes you can claim the additional tax relief on this so you donated £100.00 of which gift aid was added at £25.00 for the charity and they then got £125.00 and you can also claim additional back on your tax return, Think you can get £20.00 from the original £100.00 paid though and not the same as the charity with the £25.00 amount.

You have to excuse people on here as they are so far up there own !!! at times that they cannot see the real world.

Bluebirdman_of_Alcathays

JennyP wrote: »

Struggling to believe it's so difficult to get an answer to my question. Instead you just unhelpfully comment that you'd keep the £100. Some of us are more generous!

I tried to help - you are hypothetically £5 better off than you were when you started this thread.


As for my lack of generosity, I used to work opposite the HQ of a very large and well known charity. The car park was empty by half 4, and when it was populated, there were lots of expensive German cars. All paid for largely by the taxpayer.


http://libertarianhome.co.uk/2015/08/ending-fake-charities/


And when money does come from donors rather than lobbyists, it is often wasted


http://www.spin.com/featured/live-aid-the-terrible-truth-ethiopia-bob-geldof-feature/


As income tax is levied on a marginal basis, you will always be better off not giving at all.

xylophone

You have to excuse people on here as they are so far up there own !!! at times that they cannot see the real world.

Whether or not this is the case, the explanation is given in the link to which I referred

Higher rate taxpayers
If you pay tax at the higher or additional rate, you can claim the difference between the rate you pay and basic rate on your donation. Do this either:

through your Self Assessment tax return

by asking HM Revenue and Customs (HMRC) to amend your tax code

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



If the OP had already read this but failed to comprehend it, then she could have said so and an explanation in words of one syllable could have been provided?

JennyP

So claim back...? That means my self assessment bill gets reduced by 20% of anything I have given? Or 15%?

Dazed_and_confused

Neither.

If you make gift aid payments then the gross amount (£125 in this example) increases the amount you can pay basic rate tax at so if the gross is £125 and your salary is high enough you will pay an additional £125 tax at 20% instead of paying tax at 40%. This would save you £25 (£125 x 20%).

If you don't pay any tax then you would get an amount added to your self assessment calculation so you would have to pay the £25 basic rate relief the charity had claimed on your original £100 (net) donation.

Your own personal circumstances will dictate how much tax relief you receive but if you are well into higher rate and make smallish gift aid payments then it is likely to be 20% you will benefit from via self assessment. If however you are only just a higher rate payer then you may only be entitled to the higher rate tax relief on part of the gift aid payments.

If you only pay tax at basic rate then you won't get anything further from HMRC, the charity will get the basic rate relief so your £100 puts £125 in the charities coffers.

If your are a higher earner just from your salary then you can probably let the HMRC have an estimate of the gift aid payments you expect to make this year and ask the HMRC to give you the tax relief via your tax code but if so remember to include the actual gift aid amount on your tax return otherwise you will end up having to pay back any relief which was given via your tax code.