Gift Aid allows charities and ‘community amateur sports clubs’ (CASC) to claim tax relief on donations.
Charitable organisations can claim an extra 25p for every £1 donated, effectively increasing the value of donations by 25%, at no extra cost to the donor.
Gift Aid is an effective way to maximise the value of donations, so the causes and purposes charities serve benefit more.
The context
- The UK public gave around £15.4 billion to charity last year
- £1.7 billion in Gift Aid was claimed in 2024/25
- 80% of the public believe that eligible donors should be encouraged to donate with Gift Aid
- The sector could raise an estimated additional £560 million in Gift Aid a year
Gift Aid requirements
The standard requirements for a Gift Aim claim are:
1. Your charitable organisation has ‘charity tax status’
Your charity or CASC must be UK based and registered with HMRC. Note that this is a separate process from registering with the Charity Commission.
Donations received before the effective date of charitable tax status are not eligible.
Applying for charity tax status is normally one of the first steps when establishing a charity. If you have not already done so, you can get charitable tax status here.
2. The payment is a genuine donation
The gift must be freely given, with no significant benefit offered in return either to the donor, or to people connected to them.
Additionally, the gift must be from a specific donor, not an organisation, group of people, or on behalf of someone else.
The donor must be a UK taxpayer and has paid at least as much Income or Capital Gains Tax as the charitable organisation wants to claim in Gift Aid.
Gift Aid cannot be claimed on:
- Payments for goods and services
- Gifts with repayment conditions
- Gifts with the condition that the charity buys goods or services from the donor
- Compulsory donations
- Gifts made using ‘charity vouchers’ or ‘charity cheques’
Requesting a ‘minimum donation’ is a common pitfall; use terminology like ‘recommended donation.’ Make it clear that the donation is optional.
3. The donation is a monetary gift
The gift can only be a money payment, including cash, bank transfers, card, contactless, PayPal (or equivalent), cheque, text message platforms, etc.
Gifts in kind, such as donated items to charity shops or volunteering time, do not qualify. However, you can apply Retail Gift Aid, when such as selling donated goods on behalf of individuals. The goods themselves aren’t eligible, but the proceeds from selling them can be, if the donor agrees.
4. The donor makes a valid declaration
For your charity or CASC to claim Gift Aid, the donor must confirm that they are happy for this to happen. A formal declaration should include these details, so you can pass the information to HMRC:
- Details of the gift
- Name of your organisation
- Donor’s name
- Donor’s home address
Record of declarations must be kept for six years.
No signature or specific date is required, but the declaration must be stored and linked to the relevant donation.
See here for HMRC guidance on how to word your declarations. You can include wording to go back and claim gift aid on donations received up to four years ago.
5. Any benefit received by the donor is within limits
As covered earlier, to qualify for Gift Aid donors or people connected to donors, cannot benefit significantly from the donation.
When someone donates, your charity or CASC might want to offer something in return (goods or services) to say thank you. This is known as a ‘benefit’.
The extent of this benefit is determined by its value to the recipient, not the cost to the charitable organisation. Generally, this is determined by the retail value of the goods or service. Valuing the benefit can be complex; best to seek advice if you are at all unsure.
Gift Aid claims on donations can be made if the value of the benefit does not exceed certain limits set by HMRC:
- For donations of £100 or less, the maximum value of the benefit can be 25% of the donation
- For donations of more than £100, the maximum value of the benefit can be 25% of £100, plus 5% of £101 to £2,500, dependent on the amount given
To adhere to these limits, it’s essential to consider ‘relevant’ value of the benefit in relation to each specific donation, and the total ‘aggregate’ value of donations made by the donor during the same tax year.
6. There is a clear audit trail
A crucial part of claiming Gift Aid is keeping thorough records and creating a clear audit trail.
To ensure Gift Aid clams are successful, HMRC will need to be able to check whether the donations made to charitable organisations are actually eligible and how much is due. Gift Aid claims must match declarations, with relevant evidence provided alongside, such as a donation receipt.
Beyond standard accounting records, there should be proper evidence of:
- Gift Aid declarations
- Details of donations (standing order forms, logs, etc.)
- Relevant correspondence (for example, if a donor stops paying tax)
- Benefits given to donors
You must keep records of any cancelled declarations including the cancellation date.
The penalties for keeping insufficient records can be severe. Should HMRC test and find that your Gift Aid audit trail is incomplete, they can clawback a pro-rated value of the last four-years of Gift Aid that you have claimed.
Keep all records for six years.
How to claim…
Claims can be made by:
- Post, using the form ChR1 (for up to 90 donors)
- Using Charities Online, which provides downloadable spreadsheets (for up to 1000 donors), as well as eligible software
For charitable organisations that aren’t trusts, the time limit for making a Gift Aid claim is four years after end of accounting period during which donation received. For charitable trusts, the time limit is four years after the end of tax year during which donation received.
If a claim is accepted, your charity or CASC should be paid by bank transfer within four weeks for online claims, or five weeks for postal claims.
Gift Aid on Small Donations Scheme (GASDS)
For cash, chip and pin or contactless donations of £30 or less, you might be able to claim a top-up under the GASDS. This requires less administration, with no need for individual declarations.
£40 million was made from this scheme in 2024/25.
The limit of donations you can claim GASD on as a charity is £8,000 per year (although multiple limits are possible), and the charity must have a clean Gift Aid record for the previous two years.
You can find out more about the GASDS, by reading our article…
Gif Aid reliefs for donors
Understanding what reliefs are available to Gift Aid donors is relevant so you can make donating as appealing as possible.
For basic rate taxpayers, sadly there is no personal tax relief. The tax paid goes to the charity to gross-up the gift.
For higher rate taxpayers…
- If they donate £100 and opt in to Gift Aid, the charity claims £25, making the gift worth £125.
- Since the donor has paid tax at 40%, but Gift Aid only covers 20%, they can claim back the other 20% (of the £125 grossed up value), that’s £25.
- Consequently, the effective cost to them is just £75.
If they’re an additional rate taxpayer (in the 45% bracket), they can reclaim 25% (of the grossed-up value of £125) when making a £100 donation, or £31.25. So their donation effectively costs £68.75.
Need some guidance?
With the increasing demand on charities and the economic challenges they face, maximising the impact of donations should be of real interest. Consequently, if your charity or CASC is not making the most of Gift Aid, we would suggest you explore this opportunity. Nudge people to Gift Aid their donations. If you can get your admin in order, you can go back and claim.
Ensure you remind donors of the importance of Gift Aid to your organisation. You could send them correspondence at the end of the year to outline what difference Gift Aid has made to your charity and its beneficiaries.
However, claiming Gift Aid requires an investment of people’s time and energy, who will need to be trained properly to meet requirements. You must consider whether the money your charity will receive as a result will be worth the further administration.
To find out more, read the government’s guide to Gift Aid for charities and the full notes for the minutiae.
If you’re unsure how claiming Gift Aid might benefit your charitable organisation, or need assistance establishing the relevant processes, please get in touch, a member of our team will be happy to help…
