Generally, when you donate to a UK charity, there's a box on the form, asking if you want to donate through Gift Aid. There's seldom any useful description or discussion of what that means, though, meaning people are often confused by it.
When you make a donation to a UK charity, you'll usually get tax relief on it. What that means in practice is that, if you donate £80 and tick the Gift Aid box, the charity will go to HMRC and ask for another £20 (so, a quarter of the amount it's received from you). That means that the charity's got £100, but you're only out of pocket by £80. You've effectively donated £100 to the charity and have saved tax at 20%, which is the basic rate of tax (in England, Wales and Northern Ireland, anyway!). If your income for the year ends up being enough to pay tax at 40%, or 60%, or 45%, you can save more tax on the donation by making a claim either on your Self Assessment Tax Return or via a letter or form, but for most people the process ends once the charity claims that initial bit of tax back.
When you tick that Gift Aid box on the form, you're promising that you're going to pay at least enough tax to HMRC that year to cover the tax that the various charities you donate to are going to reclaim from them. So if you donate £1,100 in the year and tick the Gift Aid box every time, the charities are going to claim a further £275 back from HMRC, a quarter of the amount they've received from you, giving them £1,375 in total. To tick the box, you're supposed to be confident you're going to be paying enough tax (either Income Tax or Capital Gains Tax) to cover the amounts that the charities will claim back.
So, what happens if you tick the box and don't end up paying enough tax? If you're someone who has to submit Self Assessment Tax Returns, and you fill in the return correctly and honestly, HMRC will ask you to reimburse them for the top-up payments they've made to the charities. So, if that person who donates £1,100 and ticks every box in sight winds up with no tax to pay, then via their tax return they'll have to pay £275 to HMRC. That way, the charities are sitting on £1,375 and the donor is £1,375 down with no tax relief, which is how it's supposed to work. And if you're someone who doesn't have to submit Self Assessment Tax Returns? In honesty you're likely to get away with it - but really you shouldn't be ticking the box if you don't expect to pay tax equivalent to a quarter of the donations you make in a year.
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