Tax efficient giving

Please note: the tax consequences of your donations should be discussed with your financial adviser, as CAFOD cannot advise you on your personal circumstances.

Gift Aid allows charities like CAFOD to claim the basic rate of tax on donations received from UK taxpayers. The basic rate of income tax is currently set at 20%. This is how it works:

• Suppose you give CAFOD £10,000
• CAFOD is able to reclaim from HMRC (Her Majesty’s Revenue and Customs) the basic rate tax you will have paid on the income you have donated to CAFOD
• This is calculated as 20% of £12,500 (the gross amount of your gift), i.e. £2,500
• The total that CAFOD receives is therefore your £10,000 plus £2,500 Gift Aid, i.e.£12,500

Declarations can be given in writing, either by post or email, and when making a donation online. You can download a Gift Aid Declaration (188 kB) here.

Higher Rate Tax

Gift Aid also allows higher tax rate payers to claim tax relief for themselves through their tax return, in respect of the tax they have paid over and above basic rate tax. The higher rate of tax is currently 40%. This is how it works:

• Suppose you give CAFOD £10,000
• CAFOD reclaims Gift Aid as above, so your gift is now worth £12,500
• In addition, you can also claim higher rate tax relief for yourself
• This is calculated as 40% (the higher rate) minus 20% (basic rate) of £12,500 (your gross donation), i.e. £2,500
• So, in effect, your gift, which is worth £12,500 to CAFOD, has only cost you £7,500.

Top Rate Tax

Similar considerations apply for people on the highest incomes, who pay tax at the top rate of 50%. The tax relief works in exactly the same way and reduces the net cost even further, to just £6,250.

Carrying back Gift Aid donations to the previous tax year

It is possible for Gift Aid donations to be treated as being paid in the previous tax year - providing you paid enough tax that year to cover both any Gift Aid donations you made that year and the ones you want to backdate.

Claiming Gift Aid on donations made in past years

It is also possible for CAFOD to reclaim tax paid on donations before this tax year - providing you paid enough tax in the year in question to cover the Gift Aid on a donation for which CAFOD is making a tax claim.

Every £10,000 you donate could be worth over £17,000 to CAFOD

There’s one more thing that higher- or top- rate taxpayers can do if they wish: namely, to donate this tax relief back to CAFOD, making their gift worth even more. This is how it works>>

HMRC guidelines about Gift Aid>>

For further information please get in touch: Gill Drury, Head of Major Gifts on 020 7095 5340; gdrury@cafod.org.uk