Since 2007, the London Marathon has held the Guinness World Record for the largest single annual fundraising event. This record has been broken every year by this annual event, and understanding Gift Aid rules properly can mean even more money for charity. ICAEW explains how to work out if you could claim tax relief on charitable giving in your tax return ahead of the London Marathon on 23 April.
Caroline Miskin, ICAEW Technical Tax Manager explains: “Gift Aid enables charities to reclaim an amount equivalent to the basic rate of tax on all donations. If the donor is a higher or additional rate tax payer, paying 40% or 45% income tax on part of their income, they can claim a reduction in their tax bill on the difference between the two rates on Gift Aid donations made.”
Stay one stride ahead, are you eligible to claim Gift Aid?
- For a charity to claim Gift Aid on your donation you must have paid enough UK income or Capital Gains Tax in the tax year
- The tax you pay must be equivalent to the amount of Gift Aid the charity will reclaim on your donation during that tax year
- Your donations must be no more than four times what you have paid in income tax in the current financial year
- You must tell the charities you support if you stop paying enough tax
Don’t sprint to the end – you may be eligible to claim further relief
· If you are a higher or additional rate tax payer (40% or 45%) you can claim back the difference between the tax you’ve paid on the donation and what the charity got back in Gift Aid when you fill in your self assessment tax return or by asking HMRC to change your code
· For example, if you sponsor a friend £100 to run in the London Marathon, the charity they are running for can claim Gift Aid, making your donation £125. You pay 40% tax so you can personally claim back £25 because the higher rate is 40% and the charity has already claimed 20% of that.
Caroline adds: “Tread carefully, there are some important things to remember. If the charity does not reclaim the tax this money stays with HM Treasury. And if you do not claim the money back on your self assessment return or by asking for a change to your tax code, your refund also stays with the government. Be careful not to sign a gift aid form if you will not be paying enough tax as HMRC may ask you to pay the tax reclaimed by the charity.”