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Gift Aid – What to do if your income has dropped

Gift Aid – What to do if your income has dropped

Kevin Cooper


How does Gift Aid work?

Gift Aid is a government scheme available to charities and community amateur sports clubs that allows them to claim extra money from HMRC off the back of a donation by a UK taxpayer. 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, an individual can claim the difference between the rate you pay and the basic rate on your donations.

The organisations involved generally require the donations to keep going and to support their worthy causes. Over the years social media in particular has played a massive part in increasing the exposure of these organisations and as a result the donations they receive. This rise in donations has resulted in the growth of Gift Aid contributions.

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 a 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. 
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.

Where an Individual’s Income Drops

Problems can arise if the donor’s income falls, such that they are no longer 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 family commitments, Holly’s working hours dropped in the 2021/22 tax year meaning her earnings for 2021/22 dropped to £11,000. Prior to this, she had always earned around £22,000.

As her earnings for 2021/22 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 are making monthly donations. If you do not tell them and they continue claiming Gift Aid, HMRC may 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.