Monday, 16 April 2012

Gift Aid for 50% taxpayers

How Gift Aid works - from the tax people at HMRC

The Gift Aid scheme is for gifts of money by individuals who pay UK tax. Gift Aid donations are regarded as having basic rate tax deducted by the donor. Charities or CASCs take your donation - which is money you've already paid tax on - and reclaim the basic rate tax from HM Revenue & Customs (HMRC) on its 'gross' equivalent - the amount before basic rate tax was deducted.
Basic rate tax is 20 per cent, so this means that if you give £10 using Gift Aid, it's worth £12.50 to the charity. For donations between 6 April 2008 and 5 April 2011 the charity or CASC will also get a separate government supplement of three pence on every pound you give.

Claiming back higher rate tax

If you pay higher rate tax, you can claim the difference between the higher rate of tax 40 and/or 50 per cent and the basic rate of tax 20 per cent on the total 'gross' value of your donation to the charity or CASC.
For example, if you donate £100, the total value of your donation to the charity is £125 - so you can claim back:
£25 - if you pay tax at 40 per cent (£125 × 20%)
£37.50 - if you pay tax at 50 per cent (£125 × 20%) plus (£125 × 10%)

HMRC on Gift Aid

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