Gifts of cash

Cash donated to recognised charities or Community Amateur Sports Clubs (CASCs) when accompanied by a Gift Aid declaration enable the charity to reclaim Income Tax at the basic rate of 20% on the value of gift. The amount received is ‘grossed up’ - most simply; a gift of £100 equates to £125 in the charity’s hands including Gift Aid claimable.
Giving in this way effectively increases the tax-payer’s standard rate band (20%), thereby extending the point to which higher rate (40%) and additional rate (45%) tax applies, thus reducing the individual’s tax liability for the year in question.

In some cases, a gift of cash (or investments) can even lead to a tax reclaim by the recipient. The money received from HMRC can also then be gifted, and receive Gift Aid, effectively ‘supercharging’ the original gift. This is most likely to be possible where the majority of an individual’s income is from employment or a pension scheme where tax is deducted from the payment before it’s made. Making a gift to charity could mean that tax has been ‘overpaid’ hence the ability to reclaim money.

It is also worth noting that gifts of cash can be written back to adjust and reduce your personal tax liability of the previous tax year – provided you have not yet submitted that year’s self-assessment Tax Return.

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