Can You Claim Extra Tax Relief on Charity Donations?
Giving to charity can do more than support a cause you care about.
Depending on how you donate and the rate of Income Tax you pay, charitable giving can also affect your personal tax position.
The best-known scheme is Gift Aid.
Most people know that Gift Aid allows the charity to claim extra money from HMRC.
What many higher-rate taxpayers do not realise is that they may also be entitled to additional personal tax relief on those donations.
How does Gift Aid work?
When you make a qualifying donation using Gift Aid, the charity can claim an extra 25p for every £1 you donate.
So if you give:
£100
the charity can claim:
£25
making the total value of the donation:
£125
It does not cost you another £25.
The charity claims it from HMRC.
You need to have paid enough tax
Gift Aid is not simply free money from HMRC.
You must have paid enough UK Income Tax or Capital Gains Tax during the tax year to cover the amount the charity reclaims.
HMRC states that your Gift Aid donations must not exceed four times the amount of tax you have paid in that tax year.
For example, if charities reclaim £250 of Gift Aid on your donations, you generally need to have paid at least £250 of qualifying tax.
If you have not, HMRC may ask you to cover the difference.
Basic-rate taxpayers
For a basic-rate taxpayer, the main tax benefit generally goes to the charity.
You give £100.
The charity claims £25.
The charity receives £125.
You do not normally claim another £25 personally simply because you are a basic-rate taxpayer.
Higher-rate taxpayers can claim more
This is where Gift Aid becomes particularly interesting.
If you pay Income Tax at 40%, you may be able to claim the difference between:
- The basic-rate relief already received by the charity
- Your higher Income Tax rate
For example:
You donate £100.
Gift Aid increases the value of the donation to £125.
If you are a 40% taxpayer, HMRC’s example shows that you can claim an additional:
£25
because 20% of £125 is £25.
That effectively reduces the personal cost of making the donation.
What about additional-rate taxpayers?
Additional-rate taxpayers may also be able to claim additional relief.
The principle is similar.
The charity receives basic-rate Gift Aid relief.
You may then claim the additional difference based on your own marginal Income Tax rate.
The exact amount depends on your wider tax position.
How do you claim the extra relief?
Higher- and additional-rate taxpayers can generally claim their additional Gift Aid relief through:
- Their Self Assessment tax return
- Or by contacting HMRC and asking for their tax code to be adjusted
HMRC specifically provides both options.
This is worth checking because the additional relief does not necessarily appear automatically simply because you signed a Gift Aid declaration.
What if you do not complete Self Assessment?
You may still be able to claim.
HMRC says people who do not normally submit a tax return can contact HMRC to claim Gift Aid tax relief.
For eligible claims of £5,000 or less, HMRC says this can be done by phone; larger claims generally need to be made in writing.
So not filing Self Assessment does not automatically mean you lose the relief.
Keep records of your donations
If you want to claim additional tax relief, keep evidence of what you donated.
Useful records include:
- Charity name
- Donation date
- Amount donated
- Gift Aid declaration
- Regular donation statements
- Online donation confirmations
HMRC states that records should be kept where donations are being deducted when calculating taxable income.
If you donate regularly to several charities, keeping a simple annual list can make the tax return much easier.
What if you donate every month?
Regular donations can still qualify for Gift Aid.
For example:
- £50 per month
- 12 months
- Total personal donations: £600
With Gift Aid, the charities could potentially claim another £150, making the gross value:
£750
A higher-rate taxpayer may then be entitled to further personal tax relief based on that gross donation value.
Small monthly donations can therefore become significant over a full tax year.
You can sometimes include previous donations
A Gift Aid declaration can potentially cover:
- Current donations
- Future donations
- Eligible donations made during the previous four years
provided the relevant conditions are satisfied.
This can be useful if you have donated regularly but only recently completed a declaration.
However, you must have paid sufficient tax in the relevant years.
Gift Aid can affect adjusted net income
Gift Aid can also matter beyond simply producing a tax refund.
Qualifying Gift Aid donations can affect calculations involving adjusted net income.
This can be relevant for people approaching tax thresholds, particularly where:
- Personal Allowance is being withdrawn
- Other income-related tax rules apply
For example, someone whose income is slightly above £100,000 may want to understand how qualifying charitable donations affect their adjusted net income.
This is why charitable giving can form part of wider tax planning rather than being considered entirely separately.
What is Payroll Giving?
Gift Aid is not the only tax-efficient way to donate.
Some employers operate Payroll Giving schemes.
Under Payroll Giving, charitable donations are taken from your pay before Income Tax is deducted.
That means you receive Income Tax relief immediately through payroll.
You still pay National Insurance based on the relevant earnings.
How much does Payroll Giving actually cost?
HMRC gives a simple illustration.
To provide £1 to charity through Payroll Giving, the cost to you is approximately:
- 80p if you are a basic-rate taxpayer
- 60p if you are a higher-rate taxpayer
- 55p if you are an additional-rate taxpayer
Different Scottish Income Tax rates produce different figures.
This is because the donation is deducted before Income Tax.
Gift Aid or Payroll Giving?
Both can be tax-efficient, but they work differently.
Gift Aid
You donate from money that has already been taxed.
The charity claims basic-rate tax relief.
Higher- and additional-rate taxpayers may claim further relief personally.
Payroll Giving
The donation is deducted before Income Tax.
You receive the tax relief immediately through payroll.
The charity cannot also claim Gift Aid on the same Payroll Giving donation.
Which method is preferable depends partly on whether your employer offers Payroll Giving and how you prefer to donate.
What if your employer does not offer Payroll Giving?
Employers are not legally required to operate a Payroll Giving scheme.
If your employer does not provide one, you can still donate personally and use Gift Aid where the conditions are met.
What if you donate shares instead of cash?
Charitable tax relief is not limited to cash.
Different tax relief rules can apply where qualifying:
- Shares
- Securities
- Land
- Buildings
are donated to charity. HMRC’s charitable giving guidance specifically covers relief for these forms of donation.
These transactions can be more complicated than ordinary Gift Aid donations and should be considered before the asset is transferred.
Can your limited company donate to charity?
Yes, but the tax treatment is different from personal Gift Aid.
HMRC explicitly notes that the rules for limited companies differ from those applying to individuals, sole traders and partnerships.
A company making charitable donations may potentially obtain Corporation Tax relief where the relevant conditions are met.
The donation should be recorded correctly through the company rather than treated as the director’s personal Gift Aid contribution.
Do not claim Gift Aid if you have not paid enough tax
This is particularly relevant for:
- Low earners
- Retired people
- People taking career breaks
- People whose income has fallen
- Non-taxpayers
If you previously signed Gift Aid declarations but your tax position changes, tell the charities you support if you no longer pay enough tax to cover their reclaim.
Otherwise, you could become responsible for the shortfall.
Frequently Asked Questions
How much does a charity receive if I Gift Aid £100?
The charity can generally claim £25 from HMRC, increasing the total value to £125.
Can higher-rate taxpayers claim Gift Aid tax relief?
Yes. Higher-rate taxpayers can generally claim the difference between their tax rate and the basic-rate relief already received by the charity.
Does HMRC automatically refund higher-rate Gift Aid relief?
Not necessarily. You may need to claim it through Self Assessment or ask HMRC to adjust your tax code.
Can I claim Gift Aid if I do not pay Income Tax?
Only if you have paid enough qualifying Income Tax or Capital Gains Tax to cover the charity’s reclaim.
Is Payroll Giving the same as Gift Aid?
No. Payroll Giving deducts donations before Income Tax, while Gift Aid allows the charity to reclaim basic-rate tax after you make the donation.
Can a limited company use Gift Aid?
Companies follow different charitable donation tax rules from individuals.
Final thoughts
Gift Aid is not only beneficial to charities.
For higher- and additional-rate taxpayers, it can also produce additional personal tax relief.
If you donate regularly, review:
- How much you donated
- Whether Gift Aid was applied
- Your Income Tax rate
- Whether you claimed additional relief
- Whether Payroll Giving could be appropriate
- Whether the donations affect your wider adjusted net income
At Merranti Accounting, we help individuals understand how allowances, charitable giving and other personal financial decisions interact with their wider tax position.
Contact Merranti Accounting if you need help reviewing your personal tax position.
Written by Jack Smith MAAT
Senior Client Manager, Merranti Accounting
Jack is an AAT-qualified accountant with more than 12 years of experience supporting individuals and owner-managed businesses with taxation, accounts, forecasting and financial planning. He focuses on helping clients understand how everyday financial decisions affect their wider tax position.
Author image: Use Jack’s existing Merranti headshot.
