Next Egg

£1.3bn Easter Nest Egg For Charities

A 10 minute task for Higher Rate Taxpayers will reap massive rewards

Earlier this week, HMRC published some research that shows only half (52%) of Higher Rate Taxpayers realise they can put their charity donations on their tax return and receive back 25p in the pound (31p if lucky enough to be an Additional Rate Taxpayer!). This is regardless of whether or not the charity receiving the donation has claimed Gift Aid on their behalf. So if you donate £1,000 a year, you’ll get £250 or £310 knocked off your tax bill. The fact that only half of those concerned are aware of this 28 year old tax break points to a pretty bad level of awareness and the blame for that must be borne - not just by HMRC (who took 18 months to publish the research) - but shared across the financial advice industry and, to an extent, charities themselves.

And it gets worse… of those that actually know about the tax relief, less than half bother to claim it. The reasons given: one in three (32%) stated that it would take too much time and / or effort to claim tax relief on donations made. Nearly one in five (18%) cited the process for claiming tax relief as too complicated, while a similar proportion (17%) stated that by claiming tax relief, they would only receive a small amount of money back.


The upshot is that just 22% of Higher Rate Taxpayers use this form of relief. They (3.5 million of them) represent 19% of giving, equalling 1.72 billion a year. That’s at least £430 million per year in extra Gift Aid available. But, because only 22% claim, that’s reduced to £94.6m with the remainder - at least £335 million each year - going permanently down the back of a sofa at the Treasury. And that’s on top of the £560 million a year that HMRC says is not being claimed by charities because of the Gift Aid box not being ticked at the point of donation.


However all is not lost… you can tell the Taxman about donations you’ve made going back 4 tax years and you’ll receive a cheque for the tax you’ve overpaid. This is dead easy to do yourself, takes 10 minutes and doesn’t require any input from an accountant. This suddenly makes it a very attractive proposition for the people (above) who previously thought it too much effort or too complicated. There’s £1.3 billion of free, unclaimed, money just waiting for you to say ‘that’s mine thank you very much’ or, candidly, it belongs to the charities you support (ie surely it’s as much their money as it is yours?).


Whoever you think it belongs to, here’s what to do… (and, if possible, try to do it before the end of the tax year on April 5th to maximise the length of time you can go back).


1.    Draw up a spreadsheet of all the donations you’ve made as a Higher Rate Taxpayer since April 6th 2013. This is easier than you think… giving sites like JustGiving have a ‘Donations I’ve Made’ page showing your history that you can simply download. You could also search your emails for words like ‘sponsor’. You may even surprise yourself at how generous you’ve been.


2.    Send this spreadsheet along with a covering letter to the Taxman, explaining your omission and asking for an adjustment for overpayments to be made. Here’s a handy tried & tested template letter.


3.     Wait for 45 days and look out for a cheque in the post (from the CFO at HMRC no less!).


What you then do with your windfall is your call but one suggestion would be to donate the lot to your favourite charity. More info here:


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