This piece first appeared in the money section of the Saga website on 23 December 2009
The text here may not be identical to the published text

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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