How often, when you donate to a charity are you asked the question, “Can I claim Gift Aid on your donation?” And in response, you look slightly bemused at them and reply: “I don’t know, what is Gift Aid?”
I hear it a lot working in the charity sector!
So, I thought it would be a good idea to share with you exactly what Gift Aid is, how it works and what it means to the charities that need it, like Home-Start.
Cathy, Community and Events Development Manager
How Gift Aid works
Gift Aid is a UK tax incentive that was introduced by the government in the 1990s and offers charities the potential to increase fundraising by up to 25%. This means that for every £1 donated, a charity can claim an extra 25p from HMRC!
Of course, it isn’t quite as simple as that (what is?!). Gift Aid can only be claimed on donations made by people who pay tax in the UK, and the claim must be for less, in Gift Aid, than the donor has paid in tax during that year.
That’s all very well – but 25p in a £1 doesn’t sound like very much!
No, it doesn’t. But, as with a lot of things, it all adds up. Last year, Home-Start collected Gift Aid on our donations, events and fundraising activity. Our Gift Aid income was a little under £4,300.
What can £4,300 do for us?
- It’s enough to pay for three families to receive our help, or
- It’s enough to pay for a full term of Family Group sessions
And that’s definitely worth writing home about!
What can’t you claim Gift Aid on?
Gift Aid cannot be claimed on every donation relating to charity. Here are some of the donation types that are exempt from Gift Aid (this is not an exhaustive list!):
- Gifts from limited companies;
- Gifts made through Payroll Giving;
- Gifts that started as loans, but no longer need to be repaid;
- Gifts received in return for goods or services (a charity can claim gift aid for the sale of something you donate to them, but cannot claim gift aid when you purchase something from them).
So, what can you claim it on?
A charity can claim Gift Aid on donations made from individuals that have paid the same amount or more in income tax or capital gains tax in that tax year, and who have made a Gift Aid declaration that gives the charity permission to claim it.
And, in case that’s not complicated enough, there are also “special Gift Aid rules” for other types of donations, such as:
- funds from sponsored challenges;
- charity membership fees, where being a member offers a service or goods;
- church collections;
- selling goods on behalf of individuals;
- charity events where there is a set ticket price;
- charity auctions;
- volunteer expenses donated back to your charity;
- funds raised through charities involved in running schools.
If you’d like to know more about these specific rules, you can find guidance on the HMRC website.
How does the charity get the money?
Each time you choose a charity to support through Gift Aid, you have to fill in a ‘single’ declaration form (which will be provided to you by the charity) confirming that you pay tax in the UK and therefore your donations are eligible for Gift Aid.
The declaration form must include the name of the charity and the name and postal address of the donor so that the claim can be checked against HMRC records.
If the donor fills out a ‘multiple donation’ declaration form instead, that means the charity can claim Gift Aid for donations made to them in the past by the donor. However, the donor will need to ensure that their details are always up to date (e.g. tax status, address, etc.) by completing a new form each time there are any changes.
Some charities claim their Gift Aid annually, some quarterly (it depends on the charity’s own set-up); the claims are made via an online portal and payment from HMRC usually takes around 6-8 weeks.
So, the next time you’re asked if your donation can have Gift Aid claimed, you’ll feel more confident saying “yes,” knowing that your donation is going further and doing more for the causes you love.