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Gift Aid
Gift Aid is a simple scheme which permits all one-off
donations by UK taxpayers, however big or small, to
qualify for income tax relief. Procedures have been
simplified so that by merely filling in the gift aid
declaration on the Trust’s donation form the Trust will
be able to claim the Tax back on any donation made.
The further good news, from the donor’s view point,
is that if they are a higher rate (40%) taxpayer then
any charitable gift will also reduce their tax bill.
Example Herman, a 40% taxpayer, gifts £200 to the Kent
People’s Trust. Tax Benefit to the Trust - Net receipt
£200 plus Tax recovery of £56 equals a £256 donation
to the Trust in total. Tax Benefit to Herman - This
is based on the difference between the higher & basic
tax rates applied against the gross donation. For example
40% - 22% = 18% giving a Tax saving of (£256 x 18%)
= £46. This saving will be set off against Herman’s
overall tax bill for the year. Thus, in this example
the overall benefit to the Trust was £256 at a cost
to Herman of only £154.
Gifts of "Qualifying Investments"
Tax relief at a rate up to 80% can now be achieved by
gifting “qualifying investments” such as stocks & shares
with 40% of this relief coming by way of an income tax
saving to the donor. Thus if a higher rate taxpayer
gifted quoted shares worth £1000 to a charity they would
receive a deduction of £400 from their income tax bill
for the year.
A further 40% saving can arise from capital gains tax.
Let’s imagine a higher rate taxpayer holds shares worth
£1000 which would generate a taxable gain of £1000 when
sold. A sale of these shares by the taxpayer could generate
a 40% liability and net proceeds of only £600. A gift
to charity, however, can be made “tax free” thus the
charity would receive a full £1000 in value and they
-being exempt from most taxes- could sell the shares
tax free.
Example - Ron (a 40% taxpayer) holds shares in Hogwells
Ltd currently worth £5000 and would suffer a £2000 tax
bill if he sold these shares. However, if Ron gifted
the shares to the Kent People’s Trust his capital gains
tax bill would be nil, the charity would receive the
full £5000 and in addition the Inland Revenue would
give Ron a £2000 income tax refund.
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