4 Legal and Ethical Ways to Reduce Your Tax Bill – Part 3

See also:

Part 1 – Check your tax code
Part 2 – Marriage Allowance

3. Gift aid


Gift Aid is a way that charities can boost their donations without it costing you any extra, and in some cases, you can benefit too by paying less tax – simply by completing a gift aid form with the charity concerned and letting HMRC know about the donations that you have made.

Gifts made through the Gift Aid scheme are paid net of basic-rate tax (20%), which mean the charity then reclaims an additional 20% of the balance directly from HMRC.

Higher-rate taxpayers, who pay 40% tax, can claim the additional 20% tax relief either through their tax return or by contacting their tax office. This means that you giving £125 to a charity and it only cost you £75 in real terms.

To benefit from the extra tax-relief available you should keep a record of qualifying donations throughout the year, this could be in a notebook or on an app and doesn’t need to be in any specific format. You don’t need to calculate the amount of the relief due. Simply enter the total amount of payments made under Gift Aid in boxes 5, 6, 7 and 8 (as appropriate) on page TR 4 of your self-assessment tax return form or contact your tax office to have your tax code adjusted manually.

Things you may be able to include:

  • One-off sponsorships / donations to national and local charities – a sponsored walk, or tickets for a fundraiser
  • Donations to churches, school PTAs or other registered organisations on either a one-off or regular basis.
  • Memberships to other charity groups where the subscription can be Gift Aided – e.g. National Trust, some choral societies or other groups that have charitable status.

For each of these you should have completed some sort of Gift Aid declaration with your name and postcode as minimum information and, in effect, you get rewarded for your generosity. Maybe you could set up a regular payment to a charity close to your heart, in the knowledge that you are helping a worthy cause and reducing your tax bill in the process!

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