Giving to charity can leave do-gooders with an unexpected tax bill thanks to a change of Gift Aid rules announced by HM Revenue & Customs (HMRC).
In what seems an unnecessary and penny-pinching policy that will make people reconsider about supporting good causes, HMRC will send a tax demand to charity givers who do not pay enough tax to qualify for Gift Aid.
The rule change means anyone giving cash to charity will have to top up their Gift Aid donation if they pay less tax than the charity claims back on their donation.
HMRC explains that Gift Aid only works if the taxpayer pays more income tax or capital gains tax than their charities reclaim on their donations during the tax year.
Gift Aid tax top up
If they pay less tax than their Gift Aid claim, then HMRC will ask the donor to top up the tax payment by paying the difference between the tax they have paid and the Gift Aid claim made by any charity they have given money.
To make the obligation clear, HMRC has published a new Gift Aid template declaration that any charity giver must sign.
The declaration explains that for Gift Aid to go to the charity, the donor must confirm they are a UK taxpayer and that if they pay less tax in the financial year than the amount of Gift Aid claimed, they will pay the difference to HMRC.
However, tax lobbyists argue that the new measure could leave some taxpayers with an unexpected bill when the measure takes effect from next April.
Charitable giving can leave donor worse off
They claim someone who is working who loses their job during the year or a wealthy donor with a low income are at risk.
The Low Incomes Tax Reform Group (LITRG) points out that the rule leaves a charity no worse off, but can increase the financial burden on the donor.
As an example, the body says if someone gives £80 to charity under the new rules, the charity can claim £20 Gift Aid, but if the giver has to pay the tax top-up, they are £20 worse off while the charity is unaffected.
