All You Need to Know About Gift Aid

Read our handy guide to Gift Aid and find out just how it could earn your charity more income.

Allow any donations to go further by signing up to claim Gift Aid, a government tax relief scheme that allows you to receive up to 25% more cash from your supporter’s contributions. It’s a great scheme to get involved in if most of your donors are from the UK. For every £1 a charity receives from a taxpayer, they could be making an extra 25p just by qualifying for the Gift Aid scheme!

Here, we’ll outline exactly how it works, and how both a charity and its donors can start making payments and claims. If you'd like to read the full Gift Aid Guidance you can find it on the HMRC website here.

Gift Aid - what is it and how to claim it.

What exactly is Gift Aid?

You may have heard of Gift Aid before but not really understood what it is or how it could benefit you if you’re either part of a charity or a regular giver. Simply put, Gift Aid is a form of tax relief that allows charities to receive up to 25% more income from a donation made by a UK taxpayer. Once a donation has been made, a charity can then claim back the basic rate of tax from it from the government.

Donors must be a UK taxpayer for your donation to qualify for Gift Aid. They must have paid or will pay an amount of Income Tax and/or Capital Gains Tax for the current tax year (6 April to 5 April) that is at least equal to the amount of tax that all the charities and Community Amateur Sports Clubs (CASCs) that they donate to will reclaim on their gifts for the current tax year. Other taxes such as VAT and Council Tax do not qualify. The charity will reclaim 25p of tax on every £1 that the donor has given them.

Which charities can claim Gift Aid?

To be able to benefit from Gift Aid, all you need to be is a registered charity or community amateur sports club (CASC) in the UK. 

How can I claim Gift Aid?

Claiming Gift Aid for your charity will involve a bit of organisation and planning. You’ll probably find it easier to make claims online which means you'll need to sign up to Charities Online through HMRC Online Services. You'll also need to make sure you have an up to date spreadsheet that details every donation you receive. If your income is larger or increases you could consider using specific database software (like one of these). 

How can a donor sign up to give Gift Aid?

Once a charity is set up to benefit from the Gift Aid scheme, any donors will need to fill in a single Gift Aid declaration form if they’d like to make a donation that qualifies. On the form, they’ll need to provide their full name and address. The form must also include the following wording - 'I am a UK taxpayer and understand that if I pay less Income Tax and/or Capital Gains Tax in the current tax year than the amount of Gift Aid claimed on all my donations it is my responsibility to pay any difference'.

If they’ve made donations to your charity within the past, they can still claim Gift Aid on those by filling out a multiple donation declaration form. They’ll need to make sure their registered details are always up to date, and fill in a new form if anything changes, including their tax status or home address.

What about higher rate taxpayers?

Gift Aid only applies to the basic rate of tax. If a donor has paid the higher rate they can either claim this back in a self assessment tax return or in a P810 form and either keep it or give it to charity.

Are there any rules on claiming Gift Aid?

Yes, they’re a few rules you’ll want to bear in mind if you’re thinking of signing up for charity Gift Aid:

  • You can only claim donations if the donor has filled out a Gift Aid declaration form.
  • You can only claim donations where the donor has paid a sufficient amount of Income Tax or Capital Gains Tax that year. If they haven’t paid enough tax that year or are unemployed, they probably won’t be able to give Gift Aid.
  • Donations won’t qualify for Gift Aid if they’re worth more than four times the amount the donor has paid in tax that tax year.
  • You can’t claim on donations made through Payroll Giving, from limited companies, from shares, from charity cards or vouchers, or from membership fees.
  • You must have a system or database in place that records all the donations you’re given and any changes to your donors’ tax statuses.
  • If a donor of yours receives a specific benefit for donating to your charity, it won’t be seen as a voluntary donation by the government and won’t be able to be Gift Aided. Giving small tokens of appreciation to your donors is okay- just don’t go overboard!

For the full guidance look here. 

Gift Aid Small Donations Scheme

What is the small donations scheme?

The small donations scheme is when top-up payments of Gift Aid are received on cash or card donations made under £20. Gift Aid Small Donations Scheme (GASDS) can be up to 25% of the total amount so it’s great to bear in mind if you regularly receive small donations from things like street fundraising or community collection boxes. 

Who qualifies for the small donations scheme?

Your charity or CASC must have claimed Gift Aid:

  • in the same tax year as you want to claim GASDS
  • without getting a penalty in the last 2 tax years
  • in at least 2 of the last 4 tax years (without a 2-year gap between claims) if you’re claiming on donations made before 6 April 2017

You can also claim GASDS on collections in community buildings as long as there have been at least six events a year with a minimum of 10 people attending. Read the full guidance here.

How much can you earn from the small donations scheme?

If you qualify for the scheme, your charity could get extra payments of up to £8,000 but you can't claim more than 10 times your normal Gift Aid claim. That’s a lot of money to any charity so it’s well worth signing up for if you meet the requirements, especially as it’s such an easy process! 

This is what the HMRC say,

'The maximum amount of small donations top-up payments is the lower of:

  • £8,000
  • 10 times the amount you receive in Gift Aid donations - this is known as the matching rule

For example, if you receive £100 in Gift Aid donations, you can claim top-up payments on £1,000 worth of small donations under the matching rule. This works out as £250 in top-up payments.

To satisfy the matching rule, you must make claims on Gift Aid and small donations in the same tax year that you receive them.

If your charity has a community building you may be able to claim on more donations than the £8,000 limit'

How to claim

You need to register for Charities Online to make a claim.

Are there any other ways to donate to charity using tax relief schemes?

While Gift Aid is one of the most popular ways to bump up your donations through tax relief, there are some other ways that people may want to give back to your charity too:

Payroll Giving scheme- This is when you donate to charity straight from your wages or pension. The money is deducted from your income before tax is, and it’s only possible if your company, employer or private pension runs the scheme.

Donating land, property or shares- If you decide to sell or gift one of these three things to charity, you won’t have to pay any income tax or capital gains tax on them. All you’ll need to do is keep a record of the sale or donation, and show that the charity accepted it.

Leaving gifts to charities in a will- You can decide to leave money or items to a charity in your will, and you’ll either pay no Inheritance Tax on its value or a reduced amount.

If you’re thinking about registering your charity to receive Gift Aid, the most important thing you’ll need is someone at your charity who understands the procedure and can collect all the relevant information and declaration forms from donors. Besides from a little bit of admin though, the Gift Aid scheme couldn’t be easier to benefit from and is a must for qualifying charities and sports clubs!

If you’d like to read more great pieces on fundraising and donations, take a look at our practical information section that’s packed full of handy guides about things like Payroll Giving, fundraising collection boxes and raffles.

You may also enjoy reading:

Fundraising Raffles - The Complete Guide

Any material published on this website does not give a full statement of the law, nor does it reflect changes after the date stated on each document. It is intended for guidance only and is not a substitute for professional advice. No responsibility for loss occasioned as a result of any person acting or refraining from acting on the basis of this material can be accepted by the author or by Fundraising Expert.

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