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Tax Efficient Giving

There are various ways of maximising your gift depending on where you pay your taxes. Please visit the HMRC website for the latest updates.

Tax efficient giving to charity: the basics

If you want to donate to the Severn Valley Railway Charitable Trust, and you are a UK taxpayer, there are a range of tax incentives and schemes available to help you get the most from your donation.

How you can give in a tax efficient way

There are a number of tax efficient ways to give to charity as an individual.

You might be able to claim some tax back using these methods. In order to claim these, the organisation you give to must be recognised as a charity for tax purposes by HM Revenue and Customs. You can check this by asking the charity to confirm that it has an HMRC charity reference number.

If your donations are under the Gift Aid scheme, your chosen charity can also claim tax back (known as tax relief) from the government.

Depending on the type of gift you make, you may have to make a claim to receive the tax relief (either on your Self-Assessment tax return or by contacting your own Tax Office). Find your tax office The different ways you can give in a tax efficient way are summarised below.

Giving through Gift Aid to a charity

Gift Aid is an easy way to help charities get extra money on your cash donations. Your Gift Aid donation is treated as if basic rate income tax has already been deducted by the donor. Charities can then reclaim that tax from HM Revenue & Customs (HMRC).

To make a Gift Aid donation, you must pay at least as much Income Tax (and/or Capital Gains Tax) as the amount of tax reclaimed by the charity. This is currently 25 pence for every pound you donate.

Basic rate tax is 20 per cent, so this means that if you give £10 using Gift Aid, it's worth £12.50 to the charity. For donations between 6 April 2008 and 5 April 2011 the charity will also get a separate government supplement of three pence on every pound you give.

If you make a number of Gift Aid donations, you must pay enough UK tax on the total amount of those donations. If you don't pay enough tax you may have to pay HMRC any shortfall in tax paid.

Relief for higher rate taxpayers

If you pay higher rate tax and make a donation through Gift Aid you can claim some tax back.

Claiming back higher rate tax

If you pay higher rate tax, you can claim the difference between the higher rate of tax 40 and/or 45 per cent and the basic rate of tax 20 per cent on the total 'gross' value of your donation to the charity.

For example, if you donate £100, the total value of your donation to the charity is £125 - so you can claim back:

  • £25 - if you pay tax at 40 per cent (£125 × 20%)
  • £31.25 - if you pay tax at 45 per cent (£125 × 20%) plus (£125 × 5%)

You can make this claim on your Self-Assessment tax return, if you were sent one. See more information at the HMRC website.

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