What is Gift Aid?
Gift Aid is a tax relief for charities in the UK to increase donations - at no extra cost to the person making the donation.
When a charity receives a donation from a UK taxpayer, the charity is entitled to claim an extra 25% paid on that donation.
A £10 donation processed with Gift Aid becomes a £12.50 donation.
Once your charity has registered with HMRC for Gift Aid, you can claim relief on every eligible donation made by a UK taxpayer. Even if the donor is not currently employed, they are eligible to make Gift Aid payments, provided that, at some point in the tax year in which they make the donation, they pay enough tax on any of the following:
- personal or occupational pension
- stocks or shares
- bank or building society savings accounts
- rental income
- overseas or UK investment dividends
You’ll need Gift Aid declaration forms which include a description of the gift, the name of your charity (or community amateur sports club (CASC)), the donor’s full name and their home address (or at least their house number or name and postcode).
There are special rules for:
- funds from sponsored challenges for example overseas treks or marathons
- charity membership fees
- church collections
- selling goods on behalf of individuals, for example through a charity shop
- charity events or to view charity property
- charity auctions
- volunteer expenses donated back to your charity or CASC
- funds raised through charities involved in running schools
Claims are made online and the funds should be received from HMRC within five weeks.
Why does Gift Aid matter?
Charities are feeling the impact of economic pressures – inflation, price rises, reduced donations – and every penny counts.
You’ll need to consider the time and cost implications of setting up and running Gift Aid, to see whether your charity would benefit.
Who needs to know about Gift Aid?
If you are deciding whether to register with HMRC for Gift Aid, your trustees will want to understand the impact in terms of time and funds spent registering and operating the scheme. They may also want reports on how much the scheme is costing to administer, including accounting for staff time, against the income your charity receives through this tax relief.
If you have a scheme in operation, then everyone needs to know! However your people come into contact with potential donors – at events, on the phone, through your marketing materials and emails – you’ll want them to be asking donors about Gift Aid.
Whoever works on your charity’s finances will also want to make sure they have all the knowledge and information needed to ensure the scheme is being used correctly.
Additional resources
Claim Gift Aid - gov.uk
Gift Aid Awareness Day takes place during the first week of October each year.
CFG’s Guide to Gift Aid
Gift Aid Small Donations Scheme - Charity Tax Group
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