Giving and receiving: claiming relief on charitable donations

Using the Gift Aid scheme to make charitable donations can both benefit the charity receiving the gift, and improve your own tax position. If you use the scheme, and you are a higher rate taxpayer, then you are entitled to tax relief.

The charity can reclaim the basic rate tax which is deemed to have been deducted before your gift is made. The effect of this is that the charity can currently reclaim just over 28% of the amount you give.

If you are a 40% taxpayer and donate £1,200 to charities over the year, you are entitled to £300 of additional personal tax relief (£450 when the 50% tax rate comes in next year). If you are entitled to a tax refund, we can even tick a box on your Tax Return and have the refund made over to the charity of your choice - and that gift will also qualify for Gift Aid tax relief.

Donations can be made regularly - by direct debit, for example - or as a one-off. They do not even need to be made in cash - talk to us about gifts by businesses and gifts of non-cash assets.

Record keeping has become vital under self assessment. You need to be able to support every figure on your Tax Return and you should keep personal financial records relating to your Tax Return for at least six years. Your entitlement to Gift Aid tax relief might provide an additional incentive.

Please contact your usual Littlejohn tax adviser for more information on how Gift Aid may help to reduce your tax payments or email tax@littlejohnllp.com