Non-Gift Aid payments to charity and tax returns

steve.h_2

I am pretty confused about claiming tax back on charitable contributions in my tax return, and hoping someone knowledgeable can answer my question!

Let's say I am donating £100 of post-tax income to charity.

1. If I was a basic rate taxpayer, £100 after tax would be £125 before tax, since (125-100)/125 = 20%. Since payments to charity are tax free, I should be allowed to claim back the difference (£25). If I ticked the Gift Aid box when paying the charity, then the charity claims back that £25 instead of me. Fine. I understand so far.

2. If I was a higher rate taxpayer, £100 after tax would be £167 before tax (roughly), since (167-100)/167 = 40%. Again, I should be allowed to claim back the difference (£67). If I ticked the Gift Aid box when paying the charity then the charity will have claimed £25 already. However, if I list the £100 donation to my tax return under "Gift Aid Payments" then the government will pay me back £67-£25 = £42 as a tax refund. Great. I understand that too.

Now.... let's say I am a higher rate tax payer, but I didn't tick the Gift Aid box when donating the £100 to charity.

Charitable contributions are tax free, and the charity won't be claiming any of my tax back, because I didn't tick the Gift Aid box. So... the government should owe me £67 of tax back. But.. where do I claim for this on my tax return?

If I enter it under "Gift Aid Payments", I'll only get £42 back, because the government will assume the charity is claiming the other £25. But they're not. So that can't be the right place to put it. So.. how should I claim for this on my tax return?

Dazed_and_confused

Being a higher rate payer does not alter the gross amount.

£100 gift aided is £125 gross. Higher rate payers (who have paid enough over the basic tlrate limit) are then able to pay basic rate tax on an additional £125 which saves them £25 (£125 taxed at 20% = £25 instead of £125 x 40% = £50).

So £125 in the charities pocket has only ultimately cost you £75.

Where have you read non gift aided payments to a charity are eligible for tax relief?

BoGoF

You're not going to get £67 back.

Why didnt you Gift Aid it?

steve.h_2

Thanks for the replies so far.

Re. Dazed and confused: "Where have you read non gift aided payments to a charity are eligible for tax relief?"
It's on the uk gov site under "donating-to-charity": "Donations by individuals to charity or to community amateur sports clubs (CASCs) are tax free. This is called tax relief."

Re. BoGoF: "Why didnt you Gift Aid it?" Depends on the charity: some of them I signed up for in such a way that I wasn't given the option at the time, others are local things like Scout groups which have never asked me for that kind of thing.

From gov.uk it seems clear that all charitable contributions should be tax free, whether you used Gift Aid or not. The only difference Gift Aid makes is that the charity gets the tax back, not the individual. I'm trying to work out how I get that tax back if I didn't tick Gift Aid.

steve.h_2

Also, the "donating-straight-from-your-wages-or-pension" page on gov.uk makes it clear that, if you wanted to, you could donate to charity out of your pre-tax income, thus confirming that all charitable contributions are tax free, regardless of whether Gift Aid is used or not.

Dazed_and_confused

Re. Dazed and confused: "Where have you read non gift aided payments to a charity are eligible for tax relief?"
It's on the uk gov site under "donating-to-charity": "Donations by individuals to charity or to community amateur sports clubs (CASCs) are tax free. This is called tax relief."

And it immediately goes on to say,

The tax goes to you or the charity. How this works depends on whether you donate:

through Gift Aid

straight from your wages or pension through a Payroll Giving scheme

land, property or shares

in your will

From your original post I thought you were referring to a payment from you to the charity so gift aid is the only option tax relief wise. Yes you could donate from your wages without the need for gift aid but you would need to sort this with your payroll department.

steve.h_2

Hi, Dazed and confused. Thanks so much for your reply again.

I suppose what it comes down to is the fact that I don't understand why "paying on payroll before tax" and "using gift aid" are my only 2 options.

Compare to something like pension contributions. Those are tax free. So... I can either pay for them before tax via payroll, or, if I didn't do that and still pay into a pension, I can make a claim to get the tax back on those contributions on my tax return. It's just a tax-free outgoing I incurred that I need to claim the tax back on.

So, non-Gift Aid payments to charity should be exactly the same shouldn't they? They are a tax-free outgoing that I paid for after tax, so I should be able to claim the tax back, surely?

BoGoF

You're comparing apples and oranges there. Tax relief for charitable donations is to benefit you and the charity.

steve.h_2

Hi BoGoF.

BoGoF wrote: »

You're comparing apples and oranges there. Tax relief for charitable donations is to benefit you and the charity.

But if I gave to charity through payroll, before tax, that would not be using Gift Aid, so that would only be benefiting me, not me and the charity. And in that respect it's the same as pension contributions. So as far as I can see charity contributions and pension contributions are very similar.

Hence, I don't understand why I can't claim tax relief in the exact same ways as I could for pension contributions (which includes making a claim on my tax return for contributions paid after tax).

BoGoF

Unfortunately that is the way it is.

Never heard of a charity that doesn't want you to Gift Aid it these days. Are Scout groups registered charities that would qualify?

steve.h_2

BoGoF wrote: »

Unfortunately that is the way it is.

Thanks BoGoF. Yeah. That's pretty much what I had concluded. I just don't understand why.

Essentially the government is saying that, as far as basic rate tax relief goes, the only person who can benefit from that tax relief is the charity, if the payment was made after tax. But if the payment was made before tax than the individual can benefit instead. I just don't understand why they would have different rules for those two scenarios: it's inconsistent.