Gift Aid is the tax relief that lets a charity or community amateur sports club reclaim the basic rate tax a UK taxpayer has already paid on money they donate. It adds 25p to every £1 given.
How it works
A donor who pays UK Income Tax or Capital Gains Tax gives the charity a Gift Aid declaration. The charity then claims the basic rate tax on the donation from HMRC: 25p for every £1. A £100 donation becomes £125 at no extra cost to the donor.
- The donor must have paid at least as much tax in the year as the charity will reclaim on their gifts.
- Higher and additional rate taxpayers can claim the difference between their rate and the basic rate on their own tax return.
- The charity must be recognised by HMRC and must keep the declarations.
Donations by companies
A company does not use a declaration. It deducts a qualifying donation to charity from its profits for Corporation Tax, and the charity receives the gift gross. This is how a trading subsidiary passes its profits to its parent charity tax-free.
For the charity
Donations and the Gift Aid reclaimed on them are covered by the charitable exemption, provided they are spent on charitable purposes.
Read more: Corporation Tax for charities and CASCs (CT600E).