If a UK taxpayer chooses to donate money to their favourite charity, because charities are exempt from tax, the charity can reclaim the tax that has already been paid on that money. This repayment from Her Majesty's Revenue & Customs (HMRC) is known as Gift Aid.

The current basic rate of Income Tax is 20%, this means that you can claim an extra 25p in Gift Aid for every £1 you are given. 

This sometimes confuses people straight away - they see 20% and think it should be 20p - but you are reclaiming on the gross gift - £1 in my pocket was £1.25 before I paid 20% tax on it. 

Don't worry if maths is not your strong point.  All you need to remember is that for every £1 your charity is donated you can claim back 25p from the taxman.  If you use HMRC's interactive form to make your claim then all the calculations will be done for you automatically.

Follow these 5 simple steps to register for and start claiming Gift Aid

Step 1

Complete HMRC Charities Application Form ChA1 to register as a charity, or Community  Amateur Sports Club (CASC) Registration form if you are a Community Amateur Sports Club.

Before you can make a Gift Aid claim you need to be recognised by HMRC as a charity for tax purposes. Recognition by HMRC as a charity is a separate process from registering with the Charity Commission for charitable status.  Likewise your sports club will have to register as a Community Amateur Sports (CASC) with the HMRC Sports Club Unit in order to be able to claim tax back on Gift Aid donations. 

Once you're recognised by HMRC as a charity orCASCfor tax purposes, you'll be sent a reference number for use on all repayment claims and correspondence, and you'll receive all the forms you need to make your first repayment claim.

Step 2

Prepare a Gift Aid declaration for your donors to record the donor's details such as name, address and value of their gift.  This also acts as formal consent allowing you to Gift Aid their donation. 

It is very important that HMRC can verify the connection between your tax repayment claim and the tax paid by the donor. In other words, every claim must be supported by a Gift Aid declaration that shows who paid the tax in the first place.   

When you ask donors to make Gift Aid declarations, you must explain to them that they have to pay (or have paid) an amount of UK Income Tax or Capital Gains Tax that at least equals the tax that all the charities that they have donated to in the tax year are going to reclaim on their donations.   The tax can be paid on income, savings or capital gains. If your claim is more than the tax paid by the donor they will have to pay the difference to HMRC

Download Gift Aid declaration

Step 3

Record keeping

HMRC has a duty to ensure that the Gift Aid scheme is used properly and has the right to inspect your Gift Aid records.  Your charity must be able to demonstrate an audit trail from Gift Aid declarations to the donations you are claiming Gift Aid on.

Step 4

Make periodic claims to HM Revenue and Customs.

Step 5

Promote Gift Aid amongst your donors through all relevant communication channels.

To find out more about how to register for and start claiming Gift Aid come along to one of Giving Wales Gift Aid registration surgeries - the most popular of the Giving Wales courses.  Or contact WCVA's Funding Advice team to discuss your specific requirements.

Why have I seen figures of 28p for every £1 donated?

Transitional relief ran from6 April 2008to5 April 2011and you may be able to claim when you backdate your claims.  Until5 April 2008the basic rate of Income Tax was 22%. This meant that for every £1 qualifying donation received, your charity could claim repayment of 28 pence.   HMRC will automatically pay charities an extra 3 pence for every £1 Gift Aid donation received between6 April 2008and5 April 2011.

This is called 'transitional relief' and was provided by Government so that charities had time to adjust to the 2% reduction in basic rate tax - for three years they continued to receive the same amount (28 pence) for each £1 donation as they did until 5 April 2008. There is no need to claim this extra 3 pence - your claim must be for 25 pence but you will automatically receive 28 pence. Transitional relief was not a tax relief but 'government expenditure' paid to charities for a limited time.

Higher rate taxpayers

Higher rate and highest rate taxpaying donors can reclaim the difference between the basic rate that the charity claims and higher rate tax they pay (40% and 50% - those earning above £150,000 annually - on a £100 donation the highest rate taxpayer could claim back £37.50).  They can claim through their tax return, Tax Review form or by getting in touch with the tax office that handles their affairs. 

Research by CAF (2009) found that half of all higher rate taxpayers are not aware of the personal relief on donations available to them, one fifth only have used it, and most are willing to redirect the personal relief to charity.