How to Calculate Gift Aid Donations

The Gift Aid scheme allows certain charity organizations in the UK to claim from His Majesty’s Revenue and Customs (HMRC) an extra 25p for every £1 that is donated. According to HMRC, Gift Aid helps more than 60 thousand charities in the UK by adding an extra £1.6 billion. This means a huge amount of extra money for good causes. This article will guide you through the concept of Gift Aid and how to calculate Gift Aid donations in the United Kingdom. 

What is Gift Aid?

Gift Aid is a scheme introduced by the United Kingdom government that boosts the impact of donations. Taxpayers who donate money to certain charities across the UK enable these charities to receive an extra 25% on top of their donated amount.

This means when someone who pays tax in the UK gives money, the charity can get an extra 25p for every £1 donated. So, if you give £10, the charity actually gets £12.50. To qualify for Gift Aid, the organizations should be registered charities in the UK, and before reclaiming the tax on a donation, they must have received a gift aid declaration from the donor. Donors should be UK taxpayers and should make a Gift Aid declaration to be eligible.

Furthermore, people who pay higher tax rates can get tax relief when they donate to such charities – they can either keep this money or give it to charity.

Top Gift Aid Charities in the United Kingdom

What is the Gift Aid percentage? 

As discussed earlier, when UK Taxpayers donate to registered charities in the countries, the charitable organizations can claim 25p for every pound they receive. This means that the Gift Aid percentage is 25%. 

The Process to Calculate Gift Aid Donations  

The calculation is simple and based on the Gift Aid percentage. All you need to do is take the amount of donation that you’re willing to donate and calculate 25% of it. That’s how much the charity will receive extra through the Gift Aid scheme. When you donate £100 through Gift Aid, the charity actually receives £125. It’s always this percentage for the Gift Aid amount received by the charity. However, higher-rate tax payers also get tax relief through this scheme.  

Benefits of Gift Aid for Higher-Rate Taxpayers in the UK 

As a higher-rate taxpayer in the UK, you can claim the difference between what you pay in tax on your donation and the amount received back by the charitable organization. Donors can claim this by filling their Self Assessment Tax Return. 

There are four income tax bands and rates in the United Kingdom: personal allowance (0%), basic rate (20%), higher rate (40%), and additional rate (45%). Considering a contribution of £1000 being paid by a higher-rate taxpayer, the total amount of donation received by the charity will be £1,250. With a tax rate of 40%, you can calculate the amount to be claimed back as follows: £1,250 x 20% = £250. 

To help you calculate Gift Aid donations, various online tools such as online Gift Aid calculators are available.

Gift Aid for Charities: Rules, Benefits

Conclusion 

Both donors and charitable organizations should take advantage of the Gift Aid scheme in the UK. To calculate Gift Aid donations or find out how much tax relief you can receive as a higher-rate taxpayer, you can use the methods in this article. Online Gift Aid calculators are also available to make the process convenient. 

As a registered charity in the UK, Transparent Hands can claim Gift Aid on your donations at no extra cost to you. When you support the surgical and medical treatments of needy patients in Pakistan through Transparent Hands, you can also maximize the impact of your donation through Gift Aid and also get tax benefits as a high-rate or additional-rate taxpayer in the UK. Donate today to make a meaningful difference.