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For every £1 that you donate through Gift Aid, the charity actually receives £1.25. This happens as long as the donation comes from your own funds. Essentially, you’re increasing the donation amount by 25% (if you’re a basic rate UK taxpayer).
If you’re a higher rate taxpayer (meaning you earn over £50,270) or additional rate taxpayer (earning over £150,000), then you can file a Self Assessment and claim Income Tax relief for the difference between your rate of tax (40% or 45%) and the basic rate (20%).
Most employed people are eligible to claim Gift Aid, but there are a few exceptions to this rule. A charity can only claim Gift Aid when:
Your donations will only qualify if they’re not more than four times what you paid in tax in that tax year (from 6th April to 5th April). If you’re self-employed, you’re still eligible to claim Gift Aid on your donation. It’s treated in the same way as gifts from employed individuals: paid from taxed income, and the charity will claim the relief on qualifying donations.
Let’s say you’re a basic-rate UK taxpayer and you want to donate £100 to the charity Macmillan Cancer Support. You fill out the donation form and tick the Gift Aid box.
Your £100 will be treated as a gift that has been made after-tax (deducted at the basic tax rate) by HMRC. So, the total value of your gift would be £125. The charity can then claim this 20% back on your donation. £125 x 20% = £25
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