Gift Aid Dinations, year-end planning points
When you make a Gift Aid donation you are deemed to have deducted tax at the standard rate, 20% before you pay. If the highest rate of tax you pay is 20% then no further tax relief is available. If however you are a higher rate, 40%, tax payer in 2009-10 you can claim for the extra 20% tax relief (40%-20%) - simply include the Gift Aid payments you have made on your tax return and the relief will be included automatically in your tax calculation.
Common sense would suggest that the Gift Aid payments you can claim for 2009-10 are the payments made in that year? Not so! HMRC allow you to include Gift Aid payments made up to the date you file your tax return.
For 2009-10 the deadline for filing your self-assessment tax return is 31 January 2011 - accordingly if you filed your return on the last date allowed you could theoretically include any Gift Aid payments made in the period 6 April 2009 to 31 January 2011.
If you only have a small amount of income taxable at 40% for 2009-10 this may be a way to recover or reduce 40% tax and benefit a worthy cause.
If this concession continues tax payers who suffer the new 50% income tax charge, or that have income over £100,000 and stand to lose all or part of their personal allowance, could consider a significant Gift Aid donation. For the first year affected by these increases, 2010-11 you could include Gift Aid payments made from 6 April 2010 to 31 January 2012. (As long as you have not utilised any of the payments on your 2009-10 return.)