Claim Gift Aid relief a year earlier to reduce you tax liability!

If you pay income tax at either 40% or 50%, you can claim additional tax relief on your Self-Assessment tax return for cash donations paid to charity under Gift Aid. So for example, if you donate £80 to charity, this will be treated by the charity as a gross donation of £100 after taking into account basic rate income tax of £20. The charity will be able to claim back the £20 from HMRC to increase its income from your donation. If you pay tax at 40% or 50%, you can claim back an additional amount of tax relief due of £20 or £30 respectively, making the net cost of your donation £60 or £50.

The general rule is that you can claim this relief in the tax year the donation is made provided you have paid sufficient income tax or capital gains tax to cover the tax relief due. However, you can also make a claim on your tax return to carry-back amounts paid in the current tax year to be treated as being paid in the tax year covered by the return. This does not affect the timing of the charity's claim but can serve to reduce any tax liability you have to pay on 31 January. You will need sufficient income or gains in the previous tax year to cover the claim.

So if you are preparing your tax return for 2010/11 in the next few weeks, you can claim donations made between 5 April 2011 and the date of submission. Claims have to be made by 31 January 2012.

Should you want to take advantage of this rule, please call Richard Lupson-Darnell or your usual contact on 01242-252555.