What is Gift Aid?
Gift Aid is a tax relief for charities in the UK to increase donations – at no extra cost to the donor. As a charity, when BOSP receives a donation from a UK taxpayer, BOSP is entitled to claim an extra 25% paid on that donation.
A £10 donation processed with Gift Aid becomes a £12.50 donation.
What do donors need to do?
Donors need to #tickthebox on the Gift Aid declaration form and provide some basic personal details, and BOSP can claim 25p for every £1 given.
Once a donor has given their permission by filling in the Gift Aid declaration form, there is no need for them to do anything else.
Who qualifies to donate through Gift Aid?
For BOSP to claim Gift Aid on a donation, the donor must have paid UK income tax or capital gains tax that tax year, at least equal to the tax that BOSP will reclaim on the individual’s donations.
Even if the donor is not currently employed they are eligible to make Gift Aid payments so long as, at some point in the tax year in which they make the donation, they pay enough tax on any of the following:
• Personal or occupational pension
• Stocks or shares
• Bank or building society savings accounts
• Rental income
• Overseas or UK investment dividends
Higher and Additional rate tax payers
Charities can only reclaim the basic rate of tax of Gift Aided donations, regardless of whether the donor pays basic, higher or additional rate tax. However, higher and additional rate tax payers are entitled to claim the difference between the top rate of tax they pay, and the basic rate. Individuals can claim the additional tax relief through their self-assessment tax return or by asking HMRC to amend their tax code.
Example for higher rate tax payer
If you pay tax at 40% and you donate £100 to BOSP, we can claim £25 basic rate Gift Aid, and you can personally claim back £25.00 (£125 x 20%).
This means your gift of £100 has cost you £75, even though BOSP has received £125!
Example for additional rate tax payer
If you pay tax at 45% and you donate £100 to BOSP, we can claim £25 basic rate Gift Aid, and you can personally claim back £31.25 (£125 x 25%).
This means your gift of £100 has cost you £68.75, even though BOSP has received £125!
IF YOU GIVE £100 TO BOSP, HOW MUCH DOES IT COST YOU?
Non – Taxpayer £100
Basic Rate Taxpayer (20%) £100
Higher Rate Taxpayer (40%) £75 (if you claim £25 back yourself)
Highest Rate Taxpayer (45%) £68.75 (if you claim £31.25 back yourself)
This table shows how much a gift of £100 ‘costs’ people in different tax bands. You may also like to visit the Institute of Fundraising’s http://www.tax-effective-giving.org.uk/ and use their Gift Aid calculator.