Martin Lewis has highlighted a tax rule that could allow higher-rate taxpayers to reclaim 20 per cent on charitable donations made through Gift Aid. Speaking on his BBC podcast, the money expert explained how the scheme works and who can benefit.
Under Gift Aid, charities can reclaim the basic rate tax (20 per cent) on donations, boosting the contribution. However, higher-rate taxpayers in England, Wales and Northern Ireland, earning over £50,270, can also personally reclaim the additional 20 per cent not taken by the charity. This effectively reduces the net cost of the donation.
Lewis advised that those who use a tax return agent should ensure Gift Aid donations are reported to claim the extra relief. He illustrated that a higher-rate taxpayer donating £133 would see the charity receive £166 after Gift Aid, and they could reclaim £33, resulting in a net cost of £100.
The reclaim is limited to the amount of tax paid at the higher rate. Additional-rate taxpayers (45 per cent) can reclaim 25 per cent on Gift Aid donations. Lewis emphasised that the rule allows donors to give more to charity without increasing their personal spend.
