How will changes to Gift Aid affect my tax relief?

Gift Aid allows charities to claim an additional 25p for every £1 donated by UK taxpayers, effectively increasing the value of the donation. It also enables higher rate (40%) and additional rate (45%) taxpayers to claim back extra tax from HMRC.

Gift Aid can apply to donations to UK registered charities and to gifts made to Community Amateur Sports Clubs (CASC). The relief only applies to gifts made to the CASC and not to any other payments such as membership subscriptions.

Changes to tax relief

Previously, charities or CASCs situated in the UK, EU, or the EEA could be eligible for charitable tax reliefs in the UK. However, from 15 March 2023, only charities falling within the jurisdiction of the High Court in England, Wales, or Northern Ireland, or the Court of Session in Scotland, will qualify for UK charitable tax reliefs. The primary objective of this measure is to make sure that, post-Brexit, only UK charities benefit from the UK's generous charity tax exemptions.

What is the impact of this change?

For individuals, these changes will mean the removal of income tax, capital gains tax and inheritance tax reliefs on donations to an EU or EEA charity.

Care should be taken where individuals leave donations to a charity in their will, to make sure it still qualifies for inheritance tax relief under the new definition.

What tax relief do you receive?

If you’re a basic rate (20%) taxpayer, the benefit of Gift Aid is to the charity rather than to you. If you’re a higher (40%) or additional rate (45%) taxpayer, you can claim back extra tax from HMRC, by either completing a self-assessment tax return or contacting HMRC to get a P810 form to give them details. The way you get tax relief is by HMRC increasing your basic rate and higher rate tax bands by the gross amount of the Gift Aid donation.

For example, an £800 gift to charity is worth £1,000 to the charity and after tax relief, the net cost to a higher rate taxpayer would be £600 but can be as low as £400 if they earn between £100k and £125k.

Carry-back of Gift Aid donations

In some cases, Gift Aid donations can be carried back and treated as if they were made in the previous tax year.

This can be beneficial where you were a higher rate taxpayer in the previous tax year but are now a basic rate taxpayer. Alternatively, you may wish to carry back a donation if you didn’t pay enough tax in the current tax year but you did in the previous year.

If you carry back a donation, you must carry back the whole amount of it.

When you’re completing your self-assessment tax return for a year, you can only elect to carry back contributions to that year, and not from it. The election must be made in your original tax return for the year to which you’re carrying back the contributions, and before the normal self-assessment filing deadline for that year. For example, donations made in 2024/25 that you wish to carry back, must be reported on your original 2023/24 tax return before the filing deadline for that year (31 October 2024 for paper returns and 31 January 2025 for online returns). You cannot file an amended return to carry the donation back.

If you need help with your self-assessment tax return, please get in touch with your usual contact. You can find contact details on the Our People section of the website. Alternatively, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Jamie Butcher