What is Gift Aid?
Definition of Gift Aid
Gift Aid is a scheme that allows charities to reclaim tax on a donation made by a UK taxpayer. For every £1 donated, organisations can reclaim 25p. This enables a donor to increase their donation at no extra cost.
How does Gift Aid work?
Only charities and community amateur sports clubs (CASCs) can use Gift Aid to claim back tax. Gift Aid can be claimed on most donations, but some payments do not qualify - find out more in this guide to claiming gift aid by HMRC.
Claiming Gift Aid
To claim Gift Aid, the donor must declare that they have paid at least the same amount as the donation in Income Tax or Capital Gains Tax in that tax year. Following the declaration, the charity or CASC needs to claim for tax relief within four years of the end of the financial period they received it in.
Gift Aid Small Donations Scheme
The Gift Aid Small Donations Scheme (GADS) enables charities to claim 25% on cash donations of £20 or less, or contactless card donations of £20 or less. These must be claimed within two years of the end of the tax year that the donations were received.
Disclaimer: The content included in this glossary is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this glossary. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.
