BE SCROOGE – GIVE MORE!
For once I am not writing about how to save you money. But how to give more to
charity. Because this is the time of year when tins are rattling in shopping
centres, charities get a Christmas bonus as we add our favourite cause to our
presents list, and, of course, we see appeals on adverts and in the post asking
us for help for everything from lack of water in Africa to homeless young people
in Britain to donkeys in Spain.
Gift Aid is one of the Government’s better inventions. Every pound you given to
a charity can be boosted by an extra 28p from the Government. It may not sound
much but if you give £100 that is another £28 at no cost to you, paid for by the
Treasury. So it is very important that every gift is gift-aided.
That is why, in a rather Scrooge like way, I say don’t put money in charity tins
at Christmas. If you want to help that cause, make a note of it, look it up when
you get home and send a cheque with a note giving your name and address and a
statement ‘I am a UK taxpayer. Please Gift Aid this donation.’ Then for every £1
you give the Chancellor adds on 28p.
The arithmetic works like this. The money you give comes out of your taxed
income. So if you give £100 you have earned £125 before basic rate tax of 20%.
You can see that is right because £125 x 0.2 = £25 which leaves you with £100.
So that explains why the Chancellor tops every gift up with an extra 25%. The
other 3% is added on because when the basic rate of tax was cut from 22p in the
pound to 20p in 2008/09 Gordon Brown said he would give the same tax relief on
Gift Aid as if it had not been cut. That promise lasts for three years until the
end of 2010/11.
If you are not a UK taxpayer then you cannot use Gift Aid. So if your
circumstances change you should contact the charities you give to and tell them
future payments will not be Gift Aided. If one partner in a couple is a taxpayer
and the other not it is better if all donations are made in the name of the
taxpayer.
If you are over 65 and you do not get the full age allowance because your income
is above £22,900 then any gifts to charity can be taken off your income before
your allowance is calculated. That can mean you pay less tax.
If your income is sufficient to pay higher rate tax you can reclaim the extra
tax you have paid on the donation. It works out at a quarter of the net amount
you gave.
Merry Christmas!
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