Beginner's Guide To: Gift Aid

If you've made a charitable donation in the last nine years, the chances are you've been invited to tick a box that says "Gift Aid". The organisation receiving your contribution will probably explain that this can boost your donation by an impressive 28 per cent, but do you know why?

What is Gift Aid?

The Government allows tax relief on money donated to UK charities, and it's now worth almost £1bn a year to these good causes. When people give to charity, it's from an income they've usually already been taxed on. Charities can therefore reclaim the equivalent of the basic rate of tax, increasing the value of the donation made. For every £1 donated, the charity can claim an extra 25p, and HMRC will add a further 3p for every pound until April 2011. So each £1 can become £1.28 for the cause.

Do all donations qualify?

For your contribution to qualify for Gift Aid, you must pay enough UK tax to cover the amount the charity will reclaim. You'll also need to make a Gift Aid declaration if you want the organisation to make the claim, and many charities will include this on their donation forms. The giver must confirm that this is a Gift Aid donation and that they have paid enough UK tax to cover the reclaimed amount. You can make a declaration that covers an individual donation; contributions made during the previous six years; and all future gifts to an organisation.

What if I pay a higher tax rate?

If you pay more than the basic rate, you can benefit from your donation as well. Donors paying 40 per cent tax can claim back the remaining tax for themselves by requesting a P810 Tax Review, or adding it to a Self Assessment tax return.