How to claim Gift Aid as a charity

As a smaller charity, it’s worth noting that you can easily introduce Gift Aid and begin claiming extra income for your cause, just as large high-street charities do. Read on to find out what Gift Aid is, how it works, and what you need to do to get started.

What is Gift Aid?

Most charity shop frequenters are aware of Gift Aid since each eligible item comes with a price tag brandishing the words `Gift Aid Donation`. Introduced by the Finance Act in 1990, Gift Aid is a UK tax incentive that allows charities to claim relief on most donations – providing the donor has:

  • Paid the same amount or more in income tax within the last tax year;
  • Has made a Gift Aid Declaration which enables the charity to claim tax relief on it. This can be done online or via a printed form.

Of course, the former is only really considered if the Gift Aid donation is a wealthy amount, such as sponsorship. Your charity will likely only process small Gift Aid donations such as clothes, toys, and brick-a-brick.

What are the benefits of Gift Aid?

Through Gift Aid, charities can claim an extra 25p for every £1 via its designated tax relief. And for donors, Gift Aid gives reassurance that any income made on their preloved items goes to their selected charity as intended. In turn, the incentive encourages individuals to donate more, more frequently.

How do I process Gift Aid donations?

To process Gift Aid donations, you will need to follow these steps:

  • Register your charity’s details with HMRC
  • Ensure your donors sign a Gift Aid Declaration form (either online, in-store, or over the phone);
  • Some charities give a Gift Aid Donor Card in return, whereby donors receive updates about how much they’ve gifted to the charity including tax back;
  • Keep a record of each donation and their accompanying Gift Aid Declaration(s);
  • Submit your Gift Aid donations along with your usual HMRC annual accounts;
  • HMRC will then calculate and return your tax relief, including any back payments if you include these.

Entrust an ICAEW qualified charity accountant to help you

If you are unsure of how to file your donations or how to claim tax relief thereafter, you can ask a chartered charity accountant to help you.