Higher-rate tax payers unaware of tax relief on donations

As the 31 January deadline approaches for self assessment tax returns, the Charities Aid Foundation estimates that higher-rate tax payers are missing out on over £250m of tax relief on their charitable donations.

Last year (2008/09) higher-rate taxpayers claimed £280m in tax relief on donations but research published by the Charities Aid Foundation in 2009 found that around half of all higher-rate taxpayers were unaware they could reclaim 20% personal tax relief on their charitable donations in their self assessment tax return suggesting that half of this tax relief is lost each year.

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 in total.

Commenting on the millions of pound lost to the taxman, Mike Packham, Head of Private Clients at the Charities Aid Foundation said, "The lack of awareness of this tax relief and complexity of the process in claiming it back means that charities and donors are missing out on millions of pounds in tax relief.

"The Government is looking at changing the rules surrounding Gift Aid in the near future and one of the possibilities being discussed is the withdrawal of higher-rate tax payer relief on donations.  Higher-rate taxpayers should make use of this tax relief whilst it still exists."

£250m figure is an estimate based on HMRC figures and the results of our research. In 2008/9 £280m was returned by HMRC to higher rate tax payers in tax relief on charitable donations.  More information can be found at hmrc.gov.uk.