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Donations to charity over the course of a tax year can add up and taxpayers must ensure they keep a proper record of all donations to backup tax return entries. Donations that are made through the Gift Aid scheme allow for the recipient charity to claim 25p worth of tax relief on every pound donated. Higher rate and additional rate taxpayers are eligible to claim relief on the difference between the basic rate and their highest rate of tax.

For example:

If a taxpayer donates £500 to charity, the total value of the donation to the charity is £625. The taxpayer can claim additional tax back of:

  • £125 if they pay tax at the higher rate of 40% (£625 × 20%),
  • £156.25 if they pay tax at the additional rate of 45% (£625 × 20%) plus (£625 × 5%).

Planning opportunity

A higher rate or additional rate taxpayer who wants to reduce their tax bill for the last tax year could decide to make a gift to charity in the current tax year and then elect to carry back the charitable contribution to the previous year.

A request to carry back a qualifying donation made during the current tax year must be madebefore or at the same time as the self assessment tax return for 2017-18 is completed (i.e. before 31 January 2019).