Higher rate tax payers unaware of tax relief on charitable donations

As the deadline approaches for self assessment tax returns research commissioned by the Charities Aid Foundation has found that half of all higher rate taxpayers are unaware they can reclaim 20% personal tax relief on their charitable donations in their self assessment tax return.

The difference between 20% and 40% tax paid on donations can either be given to a charity, or claimed back by the donor. If the relief is given to charity for every £100 donated the charity will receive £160.20. CAF estimates that in excess of £200m of tax relief for higher rate tax payers goes unclaimed each year.

The research which was carried out by GfK NOP amongst 243 higher rate taxpayers found that the process of giving personal tax relief directly back to charity through their self-assessment tax return is putting off some higher-rate tax payers. Although 52% initially said they were likely to give their tax relief directly back to charity; when the process was explained in full, only one in four (24%) said they would.

The research also found that only two-fifths (39%) of those who were aware of this tax break had actually reclaimed their personal tax relief in the past. However, 60% of those previously unaware said they would now reclaim this relief.

For every £1,000 donated to charity, the government will add £282.00 through Gift Aid. The 20% personal tax relief on the entire original donation (original tax-break included) is worth a further £250, and if this is also returned to charity by the tax payer, an extra £70 is automatically added to it through Gift Aid. This means that for every £1,000 donation by a higher rate tax payer £1,602 can go to charity.

Commenting on the research, Sheila Hooper, Marketing Director at CAF said, "The process may be impacting the number of people who reclaim their personal tax relief on charitable donations. The choice as to whether to donate this relief back to charity or keep it is, of course, up to each individual.

"But with over half saying that they would be likely to give this tax relief back to charity, charities across the UK are potentially missing out millions of pounds at a time when they are ever more stretched financially.

"A CAF Charity Account or Trust can help people manage their charitable donations. It provides regular statements, just like a bank account, so filling out the self assessment tax return and claiming the 20% personal tax relief on all your charitable donations is made as easy as possible."