Consumer champion Martin Lewis has detailed a valuable tax rule that could put hundreds of pounds back into the pockets of higher earners who support good causes. The guidance, revisited in a highlights episode of his BBC podcast covering 2025, focuses on the often-overlooked benefit of Gift Aid for those on larger incomes.
How Gift Aid Works for Higher Rate Taxpayers
The principle centres on the UK's Gift Aid scheme. When a basic rate taxpayer donates to a charity, the organisation can reclaim the 20% basic rate tax paid on that sum, effectively increasing the value of the gift. However, Martin Lewis explained a crucial extra step for those in England, Wales, and Northern Ireland with an annual income above £50,270.
As these individuals pay income tax at 40% on earnings above that threshold, they are eligible to personally reclaim the difference. "Interestingly, you can claim the extra 20 percent back," Lewis stated. "So when you are a higher rate taxpayer, they [the charity] get the 20 per cent and if you've made a Gift Aid donation, you can claim the other amount of tax back, through your self assessment tax return."
Maximising Your Donation: A Practical Example
Lewis provided a clear illustration to show how donors can strategically increase their support without a higher net cost. He suggested that a higher rate taxpayer content to give £100 could actually donate £133. Through Gift Aid, the charity would then receive £166. The donor can subsequently reclaim £33 via their tax return, meaning the net cost to them remains the original £100 intended.
"As I strongly support charities, arguably if you are happy to donate £100 of your money as a higher rate taxpayer, donate £133," Lewis advised. He was quick to add a vital caveat: "only if you are earning that much above the 40 percent limit though."
Important Limits and Conditions
The money saving expert emphasised a key restriction to the reclaim. "The key is in order to reclaim the tax at that higher rate, you have to have paid that much tax at that higher rate," he clarified. For instance, if a taxpayer has only just crossed into the higher rate band and has paid a mere £10 in tax at the 40% rate, the maximum they can claim back from a Gift Aid donation is limited to that £10.
For those on the very highest income band, the additional rate of 45%, the potential reclaim is even greater. These taxpayers can claim back 25% on their Gift Aid donations.
Lewis also urged people who use an accountant or tax advisor to complete their return to ensure they provide full details of all Gift Aid donations. This simple step allows the professional to process the reclaim efficiently. In summary, Lewis concluded: "Generally, it does mean if you are a higher rate taxpayer, you can actually get away with giving more than you thought you would to charity, because you can then claim some of it back."
