Gift Aid Explained
A scheme that lets UK charities reclaim the basic rate tax on your donation. For every £1 you give, the charity receives £1.25. Higher and additional rate taxpayers can claim extra tax relief through Self Assessment.
What is Gift Aid?
Gift Aid is a tax relief scheme run by HMRC. When you make a donation to a registered charity and tick the Gift Aid box, the charity can reclaim 25% on top of your donation from HMRC. This costs you nothing extra because the charity is reclaiming the Income Tax you already paid on that money. You must have paid enough UK Income Tax or Capital Gains Tax in the tax year to cover the amount the charity reclaims.
How it works
If you donate £100 with Gift Aid, the charity claims £25 from HMRC, receiving £125 total. As a basic rate taxpayer, that is the end of the transaction. If you pay tax at 40% (higher rate), you can claim back £25 through your Self Assessment return or by asking HMRC to adjust your tax code. At 45% (additional rate), you can reclaim £31.25. Gift Aid also increases your basic rate band by the gross value of the donation, which can help if you are near the higher rate threshold.
Real example
Lucy earns £55,000 and donates £200 per month (£2,400/year) to charity with Gift Aid. The charities receive £3,000 (£2,400 + £600 from HMRC). Lucy claims back the higher rate difference through Self Assessment: £600 (the difference between 40% and 20% on the gross donation of £3,000). Her actual cost of giving £3,000 to charity is £1,800.
Who does this affect?
Any UK taxpayer making charitable donations. The charity benefits at all tax rates, but higher and additional rate taxpayers get personal tax relief too. Non-taxpayers should not use Gift Aid because HMRC will ask the charity to return the reclaimed tax. Self-employed individuals can claim Gift Aid relief through their tax return.
HMRC source
Related calculators: