Gift Aid

What is it?

Gift Aid is an arrangement that donors can make with the Church (or any charity) so that tax can be recovered at the basic rate on the donations. This increases their value by more than a quarter - every £100 becomes £128.21.

A donation under the Gift Aid scheme can be for any amount, large or small, regular or on an occasional basis.

The arrangement is made by completing a 'declaration' to say that the donor has paid tax to cover the donation and that he wants the Church to recover the tax. The declaration only has to be made once and it can be cancelled in writing.

How does it work?

Donors who are liable to tax at the basic rate

For example if a donor wishes to make a net contribution of £100 to the Church, this is paid from their gross income of £128.21, on which they have to pay income tax. At a 22% basic rate of tax they pay £28.21 in tax, leaving £100 to be paid to the Church. The Church can then recover tax at the basic rate from the Inland Revenue and the gift is worth more to the Church than one that does not qualify for tax relief.

Donors who are liable to tax at the higher rate

In the example, donors who are liable to tax at the higher rate (40%) will have paid £51.28 in tax. The Church can only recover tax at the basic rate but the higher rate relief can be claimed back by the donor - by entering the details on their Self Assessment tax return. A net gift of £100 to the Church then only costs the donor £76.93. The Church would hope that this reclaimed tax will be used to increase the donation at no extra cost.

Donors who are liable to tax at other rates

A donor has to pay enough income tax or capital gains tax to cover their donation. From April 2000 that is £28.21 for every £100 given. The tax may be income tax at a lower rate (on income, bank or building society interest or dividends) or capital gains tax. For example, a donation of £100 is likely (depending on interest rates etc) to be covered by the tax paid on: - the annual dividends from 1,000 Marks & Spencer shares, or the annual interest on £4,000 in a bank. If, during an Inland Revenue audit of the Church's claims, the Revenue finds that a donor has paid insufficient tax, it will give the Church the opportunity to refund the tax without going back to the donor. If the insufficiency is found during an inspection of the donor's tax affairs, then the Revenue will reclaim the unpaid tax from the donor. The Revenue may not always take steps to collect this additional tax (which is usually very small) but it is important to remember that it is entitled to and may do so.  

Donors who are quite sure they are not taxpayers (or who cease to pay tax)

For those who pay insufficient tax, there is no advantage in giving under the Gift Aid scheme. It is the responsibility of the donor to ensure that sufficient tax has been paid. If a donor's tax liability falls below that needed for their donation, they should write to the Church saying they wish to cancel their declaration with immediate effect.

Declaration Form   Bankers Order Form