Did you know that over 70% of charities have an annual income of less than £100,000? Smaller charities with limited funding are especially likely to struggle to support their causes and the people they serve in the long term. This is only aggravated further by increasing rental and supply costs we’ve seen in recent years as a result of inflation and the ongoing cost-of-living crisis.
Funding challenges highlight the sheer scope of resources required to make a meaningful difference. The good news is that there are several ways charities can ease their funding demands, and one of these is by applying for Gift Aid.
Gift Aid grants, provided by the UK government, help charities and community amateur sports clubs (CASC) reclaim a portion of the tax paid by their donors.
As a UK-based charity, Gift Aid helps you increase your donations with minimal effort. But once you’ve received this grant, you may struggle with Gift Aid reporting or the regulations surrounding it. KindLink’s CRM has streamlined the entire process, making it easy to process and claim Gift Aid.
Get started now to learn as you go.
What is Gift Aid in the UK?
Charity Gift Aid is a tax claim for non-profit and CASCs registered in the UK. With this grant, you can get more from every donation by reclaiming 25% of the basic tax rate on donations from HMRC, all without imposing any extra cost on your donors. This translates into earning an additional 25p for every £1.
To claim the Gift Aid grant, you’ll need to meet the following criteria:
- Your charity or CASC should be registered with HMRC.
- You must be registered with a regulatory body such as the Charity Commission, the Office of Scottish Charity Regulations, or the Charity Commission for Northern Ireland.
- Your organisation must be based in the UK, EU, Norway, Iceland, or Liechtenstein.
- You maintain detailed records of donors, donations, and Gift Aid claims.
There are a couple of criteria for your donors, too:
- Not all donors’ funding is eligible for Gift Aid; only a UK-based individual taxpayer is eligible. Company and non-taxpayer donations are not considered.
Gift Aid Rules That Donors Must Comply With
Not every donation qualifies for a Gift Aid claim. Only some donations are eligible for Charity Gift Aid, based on the following requirements:
- The donor must have paid enough tax, whether income tax or capital gain tax, to cover the Gift Aid Grant claim.
- The donation should have been made voluntarily and not in exchange for a benefit.
- The UK taxpayer must pay money, which can be in the form of cash, cheque, bank transfer, or through a credit/debit card. If they’ve donated food items, old clothes, or anything else, these won’t count towards your charity Gift Aid return.
- The donor must provide a valid Gift Aid declaration, including all the necessary information (name, address, and HMRC confirmation).
Which Donations Don’t Qualify for Gift Aid?
So, those are the types of donations that are eligible for the Gift Aid grant, but what about the factors that could lead to disqualification? Here’s what you should know:
- A non-UK resident or foreign donation doesn’t count toward your Gift Aid claim. Similarly, if a UK resident doesn’t file enough tax returns to cover the claim, they become ineligible for the 25% claim.
- Corporate donations also don’t count towards a Gift Aid claim.
- If the donor has received tickets, raffle or lottery entries, auctions, or memberships with access to facilities in return for their donations, they’re no longer eligible for a Gift Aid claim.
- Donations deducted from payroll (salary before tax) can’t be claimed under the Gift Aid grant.
- Donations made on behalf of a group or through charity vouchers also aren’t eligible for claim.
- Anonymous donations can’t be claimed for a charity Gift Aid claim.
UK Gift Aid Calculator: How Much Can You Expect to Make?
Is Gift Aid a good thing? Let’s look at an example to understand this scheme’s potential.
When someone donates £100 to your charity by participating in the Gift Aid scheme, you can claim an additional 25% on the amount donated, which in this case equals an extra £25. This means that the total contribution made to your charity is now £125, so you’re able to offer even more resources to help those in need.
To qualify for the additional fund, the donor must have paid at least £25 to HMRC as income tax or capital gains tax, as you’re reclaiming this amount from HMRC.
If the donor is a higher-rate taxpayer, they’ll be eligible to receive tax benefits on donations in excess of the Gift Aid tax return. But to be eligible for this exemption, there must be a 20% difference between the higher and the base rate.
If the donation is made from a joint account with their partner, both people will need to file the consent form. Gift aid exemption is available to taxpayers, regardless of whether they’re employed or retired.
How to Create and Manage Gift Aid Declarations
Here’s what’s involved in the process of creating and managing Gift Aid declarations:
Step 1: Begin by registering with HMRC as a charity or CASC.
Step 2: Get all necessary donor information, like their name, home address, and confirmation of their UK taxpayer status.
Step 3: To claim Gift Aid online, add “Charities Online” to your online account. Log in using your Government Gateway user ID and password. Once registered, you’ll receive an activation code (this takes a week to arrive in the post and remains valid for four weeks). Activate the account.
Step 4: Fill in the Gift Aid schedule spreadsheet. You can claim a maximum of 1000 donations at one time.
Step 5: Submit a claim for Gift Aid. Donations can be claimed within four years of the donation date. For the Gift Aid Small Donations Scheme (GASDS), donations under £30 can be claimed within two years.
Use Gift Aid Reporting on the KindLink CRM Platform to Safely Receive Additional Funds
A Gift Aid grant can be highly beneficial for cash-strapped charities. The more money your non-profit has, the more you can do for people in need.
At KindLink, we understand that you may not have the time or technical know-how to commit to ongoing Gift Aid management. Our CRM makes the process of claiming and reporting your charity Gift Aid much quicker and simpler.
Our CRM is integrated directly into the HMRC, streamlining your claims processing. Our entire software is compliant with GDPR, and we also provide solutions for keeping track of offline donations.