Payments to Charities

T.C. Registered, Tutor Posts: 1,448
I am confused. I don't deal with large charity payments as a rule, but I have a client who has made below the personal allowance in profit, but has given £1850 to charity. When I calculate the tax, it says that the client has to pay tax on this - £462. What is the point of declaring it on the tax return then??? Help appreciated.


  • MarieNoelle
    MarieNoelle Moderator, MAAT, AAT Licensed Accountant Posts: 1,369
    Taken from HMRC website

    "Making sure you’ve paid enough tax to use Gift Aid:
    You can use Gift Aid if the amount of Income Tax and/or Capital Gains Tax you’ve paid for the tax year in which you make your donation is at least equal to the amount of basic rate tax the charity [....]

    How to check if you’ve paid enough tax
    To work out if you’ve paid enough tax to cover your donations, divide the donation value by four. For example, if you give £100 in a particular tax year you will need to have paid £25 tax over that period. (£100/4 = £25). (Note that this calculation is based on the basic rate tax of 20 per cent)
    If you don’t think you've paid enough tax this year, you may be able to carry back your donation to the previous tax year."

    In short, if your client has gift-aided their charities' donation, it means HMRC is "giving away" an extra 25% from your tax. If you don't pay tax, you have nothing to give away.
  • T.C.
    T.C. Registered, Tutor Posts: 1,448
    Now it makes sense! Thank you!
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