Planning potential: Gift Aid It is not always appreciated that donations made under Gift Aid aren’t just good for the recipient charity or community amateur sports club. They can also be a useful planning tool for the donor – and even generate tax refunds for some taxpayers. Gift Aid benefits donors, too
that you record the date, amount of each gift and name of the recipient charity to back up your claim. Timing is everything A carry back election can be made, meaning Gift Aid donations are treated as if made in the previous tax year - something which can be of benefit, for example, where income is uneven. Strict time limits and other rules apply here, and we are happy to advise further. Tip: decide which tax year to use If you are likely to pay higher or additional rate tax (top rate in Scotland) in 2023/24, Gift Aid donations in that year should have the potential for a larger repayment. If you are making any substantial donation, and you have discretion over timing, consider whether a donation in 2023/24 is preferable to one in 2022/23. Compliance HMRC statistics in 2021 showed a tax gap attributable to Gift Aid of around £179 million: that’s the figure claimed by donors who are not, in fact, eligible to use the scheme. It’s always important to check that you have enough income tax or capital gains tax in charge to cover Gift Aid donations. Where there is an error, the donor rather than the charity or CASC, has to make good the shortfall.
Gift Aid donations work to your advantage because they can reduce your tax bill and/or preserve allowances or other entitlements. A timely gift before 5 April 2023 may help avoid: • the High Income Child Benefit Charge, where clawback starts for income above £50,000 • the abatement of the personal allowance when income exceeds £100,000 • higher and additional rates of tax (intermediate, higher, and top rates in Scotland). Tip: repayment potential If you pay tax at more than the basic rate, you are entitled to claim tax relief at your top rate of tax on the donation. This means that you get the difference between the basic rate and higher rate tax on the donation. In the year to April 2022, HMRC statistics suggest that some £540 million was due in such relief. Many higher rate taxpayers, however, fail to claim the repayment due. A repayment claim is made either via the self assessment tax return, or by asking HMRC to amend the tax code. Make sure there is a valid Gift Aid declaration in place for all gifts, and
Year end checklist
Working with you We are here to help: so please make good use of us. This guide is designed to help identify some of the areas that could have a significant impact on your overall tax position. Please consult us in good time to maximise the opportunities available.
Evaluate last-chance opportunities to access current tax rates, tax bands and allowances
Director-shareholders: review profit extraction strategy
Maximise allowances available across the family
Take advantage of 2022/23 ISA allowance
Assess payments made under Gift Aid
Review and update pension arrangements
Re-examine wills and estate planning
Be aware that reviewing your affairs before 5 April 2023 gives the best scope for tax efficiency.
Disclaimer - for information of users: This newsletter is published for the information of clients. It provides only an overview of the regulations in force at the date of publication and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this newsletter can be accepted by the authors or the firm. 2022/23
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