PART 2 – Donations to charity and gift aid – Don’t forget to keep a record of your good deeds as there is a benefit for you too!

Relief is available for donations to charities in the UK. Relief is also available for donations made to organisation in many other locations (EU, Norway, Iceland and Liechtenstein) subject to the charity satisfying the relevant conditions.

For example, a 45% taxpayer makes a gift aid donation of £5,000 to a local charity. If the taxpayer has gift aided the donation the charity is able to gross up the donation to £6,250 and claim the extra relief of £1,250 from HMRC. The taxpayer will then include the donation on their tax return and receive further tax relief of £1,562.50. This means the charity will have funds available to them of £6,250 for a net tax cost to the taxpayer of £3,437.50.

Charitable contributions are also taken into account as a deduction from adjusted net income when considering entitlement to the full personal allowance of £100,000 in the same way as pension contributions as discussed in part 1 of this series.

Alex Dent, Tax Manager, Carlisle Office