Many of us will have given good causes over the Christmas period and we all know that there are plenty of worthy causes that would be happy to oblige and take our money.
So how do you ensure that you both you and Charity make the most of these gifts, and, possibly, how do you ensure that you don’t end up on the wrong side and owe money to the taxman?
Most of us will be aware of Gift Aid. In a nutshell, if you give £100 to a favoured charity, and tick the Gift Aid box, the charity will get an additional £25 from the taxman. Sounds good so far.
However, this £25 is coming out of your tax bill – the taxman isn’t going to give away money that you haven’t already given to him. So, if you are not a taxpayer, the taxman can come knocking at your door and demand the £25 back from you. Remember that Gift Aid declaration you signed, giving your details and confirming you were a taxpayer…………?
With higher tax allowances, and people living off savings it can be easy to fall into this trap. So, if you don’t think you pay enough tax, then be wary about signing any declarations or giving any details on appeals.
So, how can you make it better? A simple answer might be that your spouse or partner is a taxpayer, and would be happy to make the donation in their name.
There is an even better outcome if you or your partner are 40% taxpayers. Remember that the charity has only claimed back £25. So you have not had 40% tax relief. So, you need to make a note of all donations made in the year, and make a claim for these, either on your Tax Return, or on a tax relief claim form. The net result is that you will get an additional £25 back as well.
The results are even better if your income is more than £100,000.
What’s more, if you know that last year’s income is very high, you can make a Gift Aid payment now and claim it against last year’s tax. Everyone wins, and money left over for presents!
If you want to discuss this or any more tax issues, then just give me a call on 01952 811745.
This article first appeared in the December 2015 edition of the Nova Magazine in Newport (tel. 01952 810560)
Author: Andrew Wilshaw FCA CTA
Barringtons Chartered Accountants