Gerry MacCrossan
Where possible, taxpayers should apply Gift Aid to any payments to charity to provide a further benefit to the charity. Higher rate taxpayers obtain additional tax relief on the grossed-up amount donated.
For example, if an individual makes a £20 cash donation to charity, the charity can reclaim a further £5 from HMRC, making a gross gift of £25. Where the individual is a 40% higher rate taxpayer, they can claim a further £5 tax relief under self-assessment, reducing the net cost of their donation to £15.
Note that the donor must declare that they are a UK taxpayer, and those who have not suffered sufficient UK tax to support the Gift Aid amount will be taxed on the shortfall.
Remember that Gift Aid does not just apply to gifts of cash. Many charity shops will now sell donated items on your behalf and treat the sale proceeds as Gift Aided donations. It is also possible to gift quoted securities and land and buildings to charity and claim Gift Aid on the market value of those assets.