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Gift aid – how to give more this Christmas

In a bid to avoid a wave of unwanted (and unrecyclable) plastic, many people are deciding to give to charity instead of swapping gifts this Christmas. UK taxpayers have the option to make charitable donations through Gift Aid, allowing charities to reclaim the tax on donations from HMRC.

Donations to charities or Community Amateur Sports Clubs (CASCs) are tax free, and with Gift Aid they can claim another 25p per pound you give, without costing you any extra.

Gift Aid requires you to complete a Gift Aid declaration either in writing or over the phone. You will need to complete a declaration for each charity you donate to. You can include any donations from the past four years, as long as you paid enough tax in those years and your donations will qualify as long as they’re not more than 4 times what you have paid in income tax or CGT in that tax year (6 April to 5 April).

If you are a higher rate taxpayer, you can also claim the difference between the rate you pay and basic rate on your donation. You can either do this through your tax return or by asking HMRC to amend your tax code. You could opt to donate this extra tax to charity.

You should keep records of the date, amount and charity if you pay higher rate tax, claim tax credits, get a higher personal allowance because of your age, get Married Couple’s allowance or are claiming tax relief through Self-Assessment or HMRC changing your tax code.

There is also the option to donate to charity through a business. For a limited company, the business receives the tax benefit. For donations that count as ‘personal’, it’s the charity that can get the tax relief unless you’re a higher rate taxpayer, when you can get a share too. There are specific rules and limitations on donations of things other than money, so make sure you consult a tax advisor.

If you have any questions about Gift Aid, tax relief or charitable donations as an individual or business, speak to Bennett Verby on 0161 476 9000, or email us here.

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