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Gift Aid – Be cautious if your income has dropped

Gift Aid – Be cautious if your income has dropped

Louise Hastings

Gift Aid – Be cautious if your income has dropped

Since the Covid-19 pandemic started in 2020 and with it continuing into 2021, charitable organisations and community amateur sports clubs have suffered from an inability to fundraise in the usual way through events and trading locations. Thankfully to compensate in part for this they have seen a huge growth in awareness and donations. This sudden rise in donations has also resulted in an increase in Gift Aid contributions.

How does Gift Aid work?

Gift Aid is a government scheme available to charities and community amateur sports clubs that allow them to claim extra money from HMRC off the back of the donation. The claimant will be able to get an extra 25p from each £1 donated as long as the donor has paid the basic rate of tax and the donation is made from their own funds. For those that pay above the basic tax rate, you can claim the difference between the rate you pay and the basic rate on your donations. 

To put this into practice, if you were eligible to donate and ticked the gift aid box, your £100 donation would actually be worth £125 to the charity due to the HMRC top-up. Therefore, it is always a good idea to tick the box if you can.

For additional rate taxpayers, a £100 donation would allow the charity to claim £125 (the same as above), however the taxpayer receives relief at 40% on the total gross donation of £125. In theory, this would mean that £25 of the relief goes to the charity and the taxpayer can claim the remaining £25. 

How is Gift Aid funded?

The tax that is claimed back by the charity is funded by the tax paid by the donor. This is only applicable where the donor has paid more tax in the year than is claimed back by charities and community amateur sports clubs on donations.

However, problems can arise if the donor’s income falls, such that they are not classed as a taxpayer or pay less tax than is claimed back on the donation. Where this is the case, HMRC will most likely seek to recover the tax reclaimed by the charity from the donor. 

For example;

Holly works self-employed as a dog groomer. She makes a monthly donation of £40 to an animal rescue charity. For each of these donations she makes Gift Aid declarations so the charity can reclaim tax at the basic rate on the donation.

Due to the Covid-19 pandemic, Holly was unable to work for much of 2020/21. She was unable to claim support under SEISS as she only started her business in January 2020. Her earnings for 2020/21 dropped to £8,000. Previously she had always earned around £22,000 prior to the pandemic.

As her earnings for 2020/21 were less than the personal allowance of £12,500, she did not pay any tax for the year. Therefore, there is no tax to fund the tax claimed back by the charity of £120 (25% (£40 x 12). HMRC could seek out to recover this tax from Holly.


If your circumstances have changed and you no longer pay enough tax, it is important to tell all the charities you support and to cancel the gift aid declaration. If you do not tell them and they continue claiming Gift Aid, HMRC will look to recover the tax. 

For one-off donations, only complete the Gift aid declaration if your income is such that sufficient tax will be paid to cover that claimed on the donation.

If you require any tax assistance, please contact us.

Moore (South) Charity Projects

Moore (South)’s Newport office recently spent a day delivering cupcakes to clients who had donated to MacMillan cancer trust as part of Moore (South)’s MacMillan Coffee Morning.