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Donate to charity and save tax

Did you know that if you’re a higher rate taxpayer, you can claim tax relief on charitable donations you’ve made through Gift Aid?

Most people know that the Gift Aid scheme allows charities to claim back the tax you’ve paid on your donation at 20%. So, for every £1 you give to charity, the charity can claim an extra 25p from HMRC without it costing you any extra.

However, if you’re a higher rate taxpayer you pay 40% tax. This means that you yourself can claim the difference between the basic rate of tax claimed by the charity through the Gift Aid scheme, and the higher rate of tax that you pay. So effectively on every donation that you make through the Gift Aid scheme, you can personally claim back 20% tax if you are a higher rate tax payer.

If you are lucky enough to be an additional rate taxpayer, paying 45% tax, then you are able to claim the 25% difference between the amount of tax claimed by the charity, and the amount of tax that you have actually paid.

To claim this tax relief you need to complete the charitable giving section on your annual self assessment tax return. You can backdate your claims for a maximum of 4 years by making a claim for tax overpayment relief to HMRC.

So if you’re a higher or additional rate tax payer, you can donate to charity and put money back in your own pocket. Win-win!