What is Gift Aid?
Gift Aid is a tax relief allowing UK charities to reclaim an extra 25% in tax on every eligible donation made by a UK taxpayer. To give under the Gift Aid scheme the donor must be a UK taxpayer and have paid sufficient tax (as income tax and/or capital gains tax) to cover the amount that will be claimed by all the charities or Community Amateur Sports Clubs he or she has donated to during that tax year.
If you are a higher rate tax payer (40% tax) or the highest rate tax payer (45% tax) you can claim back the difference paid in tax, 25p for every pound donated for 40% tax payers and 31.25p for every pound donated for 45% tax payers, when you file in your annual tax return.
What you need to do?
When you donate, you’ll be asked to confirm whether or not you are a UK taxpayer. Please note that Gift Aid can only be reclaimed on donations made by individuals who pay UK income tax or capital gains tax at a rate at least equal to the amount reclaimed on their donations in the current tax year. Other taxes such as VAT and Council Tax do not qualify.
What if I am not a UK taxpayer?
The Gift Aid scheme is unique to the UK. If you are not a UK taxpayer your donation will not be eligible for Gift Aid.
What if I don’t live in the UK?
A person living overseas can still claim Gift Aid provided that they are a UK taxpayer and can satisfy the Gift Aid declaration in the donation process.
Further information about Gift Aid can be found at: https://www.gov.uk/donating-to-charity/gift-aid
The most efficient way of donating money
One of the most effiecient ways of donating money to a UK registered charity is to donate money before it is taxed, this can be done through a "Payroll giving" or "Give as you earn" scheme. With payroll giving your donation not only costs you less, you recieve a tax benefit and the charity receiving the donation avoids the administrative burden of having to collect Gift Aid. For those donors donating money as zakat this can have a huge benficial impact.
Details of Payroll Giving can be found here.