Gift Aid confusion re: tax help please

Asker

I've read but I still don't get it, sorry. 

I am currently (privileged enoguh to be) a higher rate (45%) tax payer but may not be for much longer.   I made a promise to myself to give £12k to charity, and that is exactly what I intend to do.  However, I understand I will have some tax relief so want to do it while I'm this higher rate. 

I've also looked into Gift Aid and understand the charity will get extra money if I do that.  That's obviously fine by me, but maybe not if it means I then get less tax relief. 

I don't fully understand the tax implications basedon the gov uk 'help' on this.  

If I pay 12k and don't do gift aid will I get relief on the full 12k?  (so it'll cost me 0.45x12k less?)  If I do gift aid will I only be able to claim a smaller amount?   

zagfles

You get tax relief as well as the charity if you use gift aid. They claim basic rate and you get the rest. Your basic rate band gets extended by the gross gift aid contribution. 
If you give £12k via gift aid, the charity claims £3k tax relief (gross contribution is £15k). 
Your basic rate band gets extended by £15k which means you get relief at the difference between your marginal rate and the basic rate. If that's all at 45% you'd get £3750 relief. 
If you paid without using gift aid you'd probably get zero tax relief. 

amanda1024

Asker said:

I've read but I still don't get it, sorry. 

I am currently (privileged enoguh to be) a higher rate (45%) tax payer but may not be for much longer.   I made a promise to myself to give £12k to charity, and that is exactly what I intend to do.  However, I understand I will have some tax relief so want to do it while I'm this higher rate. 

I've also looked into Gift Aid and understand the charity will get extra money if I do that.  That's obviously fine by me, but maybe not if it means I then get less tax relief. 

I don't fully understand the tax implications basedon the gov uk 'help' on this.  

If I pay 12k and don't do gift aid will I get relief on the full 12k?  (so it'll cost me 0.45x12k less?)  If I do gift aid will I only be able to claim a smaller amount?   

I don't think you get a choice to 'claim' both sets of gift aid. The charity will be able to claim basic rate gift aid, and you'll be able to claim the extra higher rate gift aid. What some people do is to reduce the amount they give to the charity such that the total the charity receives (the core donation plus basic gift aid) is the total amount they want to donate

Asker

zagfles said:

You get tax relief as well as the charity if you use gift aid. They claim basic rate and you get the rest. Your basic rate band gets extended by the gross gift aid contribution. 
If you give £12k via gift aid, the charity claims £3k tax relief (gross contribution is £15k). 
Your basic rate band gets extended by £15k which means you get relief at the difference between your marginal rate and the basic rate. If that's all at 45% you'd get £3750 relief. 
If you paid without using gift aid you'd probably get zero tax relief. 

Thanks that makes sense.  Yes I guess the crux of it is if I don't use the gift aid scheme can I not claim the full 45%?  I thought charity donations were tax deductible or maybe gift aid is the only way ?

amanda1024

Asker said:

zagfles said:

You get tax relief as well as the charity if you use gift aid. They claim basic rate and you get the rest. Your basic rate band gets extended by the gross gift aid contribution. 
If you give £12k via gift aid, the charity claims £3k tax relief (gross contribution is £15k). 
Your basic rate band gets extended by £15k which means you get relief at the difference between your marginal rate and the basic rate. If that's all at 45% you'd get £3750 relief. 
If you paid without using gift aid you'd probably get zero tax relief. 

Thanks that makes sense.  Yes I guess the crux of it is if I don't use the gift aid scheme can I not claim the full 45%?  I thought charity donations were tax deductible or maybe gift aid is the only way ?

I think the only alternative to Gift Aid is payroll giving - in which case you don't pay the tax in the first place rather than claiming the relief.

Asker

amanda1024 said:

Asker said:

I've read but I still don't get it, sorry. 

I am currently (privileged enoguh to be) a higher rate (45%) tax payer but may not be for much longer.   I made a promise to myself to give £12k to charity, and that is exactly what I intend to do.  However, I understand I will have some tax relief so want to do it while I'm this higher rate. 

I've also looked into Gift Aid and understand the charity will get extra money if I do that.  That's obviously fine by me, but maybe not if it means I then get less tax relief. 

I don't fully understand the tax implications basedon the gov uk 'help' on this.  

If I pay 12k and don't do gift aid will I get relief on the full 12k?  (so it'll cost me 0.45x12k less?)  If I do gift aid will I only be able to claim a smaller amount?   

I don't think you get a choice to 'claim' both sets of gift aid. The charity will be able to claim basic rate gift aid, and you'll be able to claim the extra higher rate gift aid. What some people do is to reduce the amount they give to the charity such that the total the charity receives (the core donation plus basic gift aid) is the total amount they want to donate

Thanks yes a workaround may be an option, although I'm not sure how that sits with my conscience as it may not fulfill my promise.

So if I don't go via gift aid I won't be able to claim 45% for myself?

Dazed_and_C0nfused

Asker said:

amanda1024 said:

Asker said:

I've read but I still don't get it, sorry. 

I am currently (privileged enoguh to be) a higher rate (45%) tax payer but may not be for much longer.   I made a promise to myself to give £12k to charity, and that is exactly what I intend to do.  However, I understand I will have some tax relief so want to do it while I'm this higher rate. 

I've also looked into Gift Aid and understand the charity will get extra money if I do that.  That's obviously fine by me, but maybe not if it means I then get less tax relief. 

I don't fully understand the tax implications basedon the gov uk 'help' on this.  

If I pay 12k and don't do gift aid will I get relief on the full 12k?  (so it'll cost me 0.45x12k less?)  If I do gift aid will I only be able to claim a smaller amount?   

I don't think you get a choice to 'claim' both sets of gift aid. The charity will be able to claim basic rate gift aid, and you'll be able to claim the extra higher rate gift aid. What some people do is to reduce the amount they give to the charity such that the total the charity receives (the core donation plus basic gift aid) is the total amount they want to donate

Thanks yes a workaround may be an option, although I'm not sure how that sits with my conscience as it may not fulfill my promise.

So if I don't go via gift aid I won't be able to claim 45% for myself?

Payroll giving is what you're looking for.

Gift Aid means you only get relief over and above the basic rate relief the charity claims.

zagfles

Asker said:

amanda1024 said:

Asker said:

I've read but I still don't get it, sorry. 

I am currently (privileged enoguh to be) a higher rate (45%) tax payer but may not be for much longer.   I made a promise to myself to give £12k to charity, and that is exactly what I intend to do.  However, I understand I will have some tax relief so want to do it while I'm this higher rate. 

I've also looked into Gift Aid and understand the charity will get extra money if I do that.  That's obviously fine by me, but maybe not if it means I then get less tax relief. 

I don't fully understand the tax implications basedon the gov uk 'help' on this.  

If I pay 12k and don't do gift aid will I get relief on the full 12k?  (so it'll cost me 0.45x12k less?)  If I do gift aid will I only be able to claim a smaller amount?   

I don't think you get a choice to 'claim' both sets of gift aid. The charity will be able to claim basic rate gift aid, and you'll be able to claim the extra higher rate gift aid. What some people do is to reduce the amount they give to the charity such that the total the charity receives (the core donation plus basic gift aid) is the total amount they want to donate

Thanks yes a workaround may be an option, although I'm not sure how that sits with my conscience as it may not fulfill my promise.

So if I don't go via gift aid I won't be able to claim 45% for myself?

It's exactly the same! If you want the charity to get £12k, you donate £9600. The charity claims £2400 tax relief so they get £12k

You then get your basic rate band extended by £12k giving you an extra £3000 tax relief. Charity gets £12k, it's cost you £6600 (your £9600 net donation minus £3000 tax relief). Exactly the same as you getting full 45% relief on £12k. 

Asker

Dazed_and_C0nfused said:

Asker said:

amanda1024 said:

Asker said:

I've read but I still don't get it, sorry. 

I am currently (privileged enoguh to be) a higher rate (45%) tax payer but may not be for much longer.   I made a promise to myself to give £12k to charity, and that is exactly what I intend to do.  However, I understand I will have some tax relief so want to do it while I'm this higher rate. 

I've also looked into Gift Aid and understand the charity will get extra money if I do that.  That's obviously fine by me, but maybe not if it means I then get less tax relief. 

I don't fully understand the tax implications basedon the gov uk 'help' on this.  

If I pay 12k and don't do gift aid will I get relief on the full 12k?  (so it'll cost me 0.45x12k less?)  If I do gift aid will I only be able to claim a smaller amount?   

I don't think you get a choice to 'claim' both sets of gift aid. The charity will be able to claim basic rate gift aid, and you'll be able to claim the extra higher rate gift aid. What some people do is to reduce the amount they give to the charity such that the total the charity receives (the core donation plus basic gift aid) is the total amount they want to donate

Thanks yes a workaround may be an option, although I'm not sure how that sits with my conscience as it may not fulfill my promise.

So if I don't go via gift aid I won't be able to claim 45% for myself?

Payroll giving is what you're looking for.

Gift Aid means you only get relief over and above the basic rate relief the charity claims.

THanks I'll see if my company does that.

Asker

zagfles said:

Asker said:

amanda1024 said:

Asker said:

I've read but I still don't get it, sorry. 

I am currently (privileged enoguh to be) a higher rate (45%) tax payer but may not be for much longer.   I made a promise to myself to give £12k to charity, and that is exactly what I intend to do.  However, I understand I will have some tax relief so want to do it while I'm this higher rate. 

I've also looked into Gift Aid and understand the charity will get extra money if I do that.  That's obviously fine by me, but maybe not if it means I then get less tax relief. 

I don't fully understand the tax implications basedon the gov uk 'help' on this.  

If I pay 12k and don't do gift aid will I get relief on the full 12k?  (so it'll cost me 0.45x12k less?)  If I do gift aid will I only be able to claim a smaller amount?   

I don't think you get a choice to 'claim' both sets of gift aid. The charity will be able to claim basic rate gift aid, and you'll be able to claim the extra higher rate gift aid. What some people do is to reduce the amount they give to the charity such that the total the charity receives (the core donation plus basic gift aid) is the total amount they want to donate

Thanks yes a workaround may be an option, although I'm not sure how that sits with my conscience as it may not fulfill my promise.

So if I don't go via gift aid I won't be able to claim 45% for myself?

It's exactly the same! If you want the charity to get £12k, you donate £9600. The charity claims £2400 tax relief so they get £12k

You then get your basic rate band extended by £12k giving you an extra £3000 tax relief. Charity gets £12k, it's cost you £6600 (your £9600 net donation minus £3000 tax relief). Exactly the same as you getting full 45% relief on £12k. 

Ah , absolutely brilliant yes I get it now.

So now I have to decide if that morally fits my promise of "giving £12k" if it's only going to hurt me at £6600...

I think after all this I may just give the £12k and then we both benefit roughly equally. They get an extra £3k and I get £3750 back.... seems a good compromise to me I can live with. 

Thanks again!

chrisbur

zagfles said:

Asker said:

amanda1024 said:

Asker said:

I've read but I still don't get it, sorry. 

I am currently (privileged enoguh to be) a higher rate (45%) tax payer but may not be for much longer.   I made a promise to myself to give £12k to charity, and that is exactly what I intend to do.  However, I understand I will have some tax relief so want to do it while I'm this higher rate. 

I've also looked into Gift Aid and understand the charity will get extra money if I do that.  That's obviously fine by me, but maybe not if it means I then get less tax relief. 

I don't fully understand the tax implications basedon the gov uk 'help' on this.  

If I pay 12k and don't do gift aid will I get relief on the full 12k?  (so it'll cost me 0.45x12k less?)  If I do gift aid will I only be able to claim a smaller amount?   

I don't think you get a choice to 'claim' both sets of gift aid. The charity will be able to claim basic rate gift aid, and you'll be able to claim the extra higher rate gift aid. What some people do is to reduce the amount they give to the charity such that the total the charity receives (the core donation plus basic gift aid) is the total amount they want to donate

Thanks yes a workaround may be an option, although I'm not sure how that sits with my conscience as it may not fulfill my promise.

So if I don't go via gift aid I won't be able to claim 45% for myself?

It's exactly the same! If you want the charity to get £12k, you donate £9600. The charity claims £2400 tax relief so they get £12k

You then get your basic rate band extended by £12k giving you an extra £3000 tax relief. Charity gets £12k, it's cost you £6600 (your £9600 net donation minus £3000 tax relief). Exactly the same as you getting full 45% relief on £12k. 

"you donate £9600"
"charity claims £2400 tax relief"
"giving you an extra £3000 tax relief".

Probably just my maths at fault here but this seems to be creating £5400  in tax relief when only £4320 tax would have been paid on the £9600