Claiming retrospective tax refund for gift aid as a higher rate tax payer

Youwish

I think I've tipped into the higher, 40% tax band this year due to fiscal drag. This co-incides with higher additional income I will earn this year from savings accounts which means that the savings income will be depleted by 40% rather than 20% in tax. I believe I can claim an additional 20% off HMRC for my gift aid donations this year. Also HMRC guidance says you can claim the higher rate for gift aid donations going back up to 4 years. What is not clear is can I claim for gift aid donations in the past 4 years when I was still a basic rate tax payer? (I suspect the answer is no, but HMRC rules have various twists and turns for retrospective tax). I'd add that I'm a pensioner so probably a target for the chancellor as having 'the broadest shoulders' and no longer a 'hard working person', even though I'm putting away money to pay for my care in my dotage should I need it. Grateful for any insights and advice before I ask the tax office.

Dazed_and_C0nfused

You cannot claim higher rate relief if you weren't a higher rate payer.

You don't necessarily get an "additional 20%" even if you are a higher rate payer.  You might have Gift Aid donations of say £1,000 but only pay higher rate tax on £300 of your income.

The way it works is you tell HMRC about the gross Gift Aid donation (inclusive of the basic rate relief the charity gets) and your basic rate band is increased by this amount.  Bringing more income into the basic rate and less on the higher rate band.

There can be other benefits as well.  You may remain eligible for Marriage Allowance and/or retain the £1,000 savings nil rate band (aka Personal Savings Allowance).

Youwish

thanks for the explanation. This is all new territory for me and I'm still not clear on how it works in practice. 

The MSE blog states that you inform HMRC of your GA donations 'so it can adjust your tax code (if you're an employee or receiving a private pension). This will mean you'll have less tax taken off you in future to give you the extra relief you are due'.

In the following ilustrative example, in the 2023-2024 tax year, my pre-tax income was £51,271 ie £1,000 above the Basic Rate tax of 20%. £1,000 would be taxed at the 40% rate. By co-incidence, my GA donations that year amounted to £1,000 (the charities claim the additional 25% from HMRC). I inform HMRC of my donations and my claim as a higher rate tax payer. They adjust my tax code for the folowing year to repay me the additional tax relief due on the £1,000 donation the 2023-2024 year. 

My actual pre-tax income for the 2024-2025 year (disregarding the HMRC tax adjustment as that treats the additional GA tax relief on the £1,000 as a discrete claim) will be £51,671, i.e £1,300 above the BR rate, so the £1,300 will be subject to 40% income tax (subject to any GA donations made in the current year,claimable in the the following year's adjusted tax code).

Is that correct?

Dazed_and_C0nfused

HMRC will not change your current tax code to allow relief on Gift Aid donations made in a previous tax year.

They would send you a P800 or PA302 letter with a full calculation of your tax position for the previous year.  And you can usually then pull any tax overpaid into your bank account (usually via your Personal Tax Account).

You can get a provisional tax code adjustment for the current tax year for Gift Aid donations made in the current tax year.  You need to make sure HMRC have an upto date estimate of your taxable earnings (expected P60 pay figure) to get this as accurate as possible.