Gift Aid cycling

Re-Cycling Donations

Wiggo's Woes Highlight Higher-Rate Gift Aid Potential

It never rains but it pours for Sir Bradley Wiggins. As well as being accused of drugs cheating, the cyclist has just been named among investors in a £100m tax avoidance scheme in which it is feared that Gift Aid allowances were being abused for personal gain.

This raises an interesting issue because Gift Aid allowances for Higher Rate taxpayers are, conversely, more often than not overlooked… discarded by their donors and resigned forever to the back of a sofa at the Treasury.

In case you didn’t know, as well as the 25p in the pound Gift Aid that charities can claim on donations from taxpayers, individual donors can put in a further claim for 25p in the pound if they are a Higher Rate taxpayer (earning £45k) or 31p if a Top Rate taxpayer (earning £150k or more). These additional payments, however, rely on the donor telling the Taxman via their Accountant or Self-Assessment forms. A bit of a faff, yes, but, it has the potential to turn a £1 donation into a £1.56 donation.

According to a recent report by Professor Kim Scharf (@KimberleyScharf) entitled ‘The Effects of Tax Incentives on Charitable Donations in the UK’, fewer than 30% of the 3.5 million taxpayers with higher incomes make Gift Aid claims on their tax returns. This means there are around 2.5 million legitimate claims not being made each year - totalling billions of pounds in money not being refunded to those individuals and, arguably, on to the charities they support. With donations working out at an average of 0.5% of annual income, that figure could easily double the £1.78 billion a year that is currently being used as Gift Aid for good causes.

If this is all news to you then I bet you don’t know that Higher Rate taxpayers can also put in a claim going back 4 tax years? This is a lot less complicated than joining a tax avoidance scheme and has the potential to do more good. What would you do with a windfall cheque from HMRC - a free lump sum - roughly the same size as the total pot of money that you give away to charity in a normal year? If you can list the donations you made as far back as April 2014, then it only takes a letter to the Taxman to generate this kind of rebate. Some people do this by using the search function in their emails - others go to their Account page on giving sites - such as Just Giving - which are required to keep a handy record for you that you can simply download. We’ve even heard of individual charities that provide their supporters with a spreadsheet of their donations once a year to help them make the most of their tax returns. OK, so the extra Gift Aid money has to go direct to the individual rather than the charity but this can only encourage further donations.

If you are motivated by this, or know someone who might be, get your yellow jersey on (ideally ahead of the end of the tax year on 5th April) and pedal over to  

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