Gift Aid allows UK charities to claim back the basic rate tax already paid on donations by the donor.
This means they can claim back from the government on your behalf 25p for every £1 donated, boosting the value of the donation by a quarter.
How does Gift Aid work?
When a UK taxpayer gives a gift of money to a charity, tax has already been paid on that money. Because voluntary organisations are exempt from tax, you can claim this money back from HM Revenue & Customs (HMRC).
How is Gift Aid calculated?
Under HMRC’s Gift Aid scheme, charities can reclaim an amount equal to basic rate tax (20%) on the amount of the donation, plus basic rate tax already paid by that taxpayer on that donation. Take a £100 donation, the fraction applied to calculate Gift Aid is 100 x 20/80, which is 25% of £100 which equals £25. This means that the charity receives £125 for a £100 donation.
Why are some donations not eligible for Gift Aid?
Donations from non-UK taxpayers are not eligible for Gift Aid and HMRC regulations also mean that Gift Aid can’t be reclaimed on a donation if:
- the donation was on behalf of someone else or a group of people
- the donation was on behalf of a company
- the donation was to a family member or friend doing an event where the charity is contributing to their costs
- the donation was made in return for goods, rights or services.
Someone made a mistake when making their donation and Gift Aid hasn’t been claimed – what can I do?
Once a donation has been made it isn’t possible to adjust the Gift Aid on it, it must be refunded and the donation made again.
How do you get recognition from HMRC for your charity?
You must register your charity’s details with HM Revenue and Customs (HMRC) to get tax back on things like Gift Aid donations, using the Government Gateway
To register have the following charity information at hand:
- bank account details and financial accounts
- trustees details including dates of birth and National Insurance numbers
- registered charity number
- charitable purposes of your organisation
- your charity’s constitution (governing document)
Originally, declarations had to be made in writing but they can now be made orally, although the charity must confirm the declaration in writing and keep a copy of the confirmation.