Charitable donations made under the Gift Aid scheme can result in significant benefits for both the donor and the charity. Currently, the charity is able to claim back 20% basic rate tax on any donations and if the donor is a higher rate taxpayer the gift will qualify for 40% tax relief. Therefore a cash gift of £80 will generate a tax refund of £20 for the charity so that it ends up with £100. The donor will get higher rate tax relief of £20 so that the net cost of the gift is only £60.
Where the 45% additional rate of tax applies, the net cost of the gift in this example would be only £55 for an individual liable at this rate.
Tax relief against 2014/15 income is possible for charitable donations made between 6 April 2015 and 31 January 2016 providing the payment is made before filing the 2014/15 tax return.
Always remember to keep a record of any gifts you make.
It may also be possible to make gifts of quoted shares and securities or land and buildings to charities and claim income tax relief on the value of the gift. This may be tax efficient for larger charitable donations.