Money
Managing your money
Choose your donations carefully this Christmas
Make a charitable donation through Gift Aid, rather than in a collecting tin this Christmas, and Chancellor Alistair Darling will have to give back to the charity the tax you have paid on it, writes Paul Lewis
When you are out and about this Christmas will you be tempted to put change in the charity tins or give a £2 coin to children singing carols at the station?
I don't want to sound like Scrooge, but you should resist the temptation.
Instead, write down the name of the charity and send the money as a Gift Aid donation. That way the charity can claim an extra 28p for every £1 you give.
The extra represents the basic-rate tax you have already paid on the £1. (Note for non-mathematicians: You earn £1.28. Basic-rate tax is 22%, which on £1.28 is 28p, leaving you with £1).
Some churches and schools provide envelopes for your gift; you write down your name and address and they claim the Gift Aid bonus. But the Christmas collectors don't bother, so send the money direct to the charity, say you are a taxpayer and want to Gift Aid the donation.
Non-taxpayers cannot do Gift Aid because they have not paid any tax for the Government to refund, so they might as well put the money in the tin.
However, if you are a higher-rate taxpayer – and nearly four million of us now are – you can reclaim the higher-rate tax you have paid on the donation when you fill in your self-assessment form. That means you should give 30% more than you want to spend.
(Another note for non-mathematicians: You give £1.30. The charity claims 28% of that, which is 37p, so it gets £1.67. You reclaim the extra higher-rate tax 40%-22% = 18% of £1.67, which is 30p. Leaving you just £1 out of pocket).
So if you pay tax, always give to charity through Gift Aid and make sure the Chancellor does his bit too.
After all, it's your money he's giving back!
- This article first appeared in the December 2007 edition of Saga Magazine
