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Glasgow
+44 (0)141 221 2984

Edinburgh
+44 (0)131 225 6366

Stirling
+44 (0)1786 451745

Dumbarton
+44 (0)1389 765238

Hamilton
+44 (0)1698 459444

French Duncan

Gift Aid: an unexpected sting in the tail

18 March 2015

From 6 April, the starting rate of tax for savings income (such as a bank or building society interest) will be reduced from 10% to 0%, and the maximum amount of taxable savings income that can be eligible for this zero starting rate will be increased from £2,880 to £5,000.

The Chairman of the Low Incomes Tax Reform Group warns that although some savers will be able to benefit from a zero rate of tax on their savings income, there is a possible “sting-in-the-tail” awaiting savers who make donations under Gift Aid. Gift Aid donors must have paid enough tax during the tax year to cover the tax the charity will recover from the gift. If they have donated to a charity under an enduring Gift Aid declaration but paid either no tax or insufficient tax, the charity makes the assumption that the donation has come from someone paying basic rate income tax at 20% and claim this back from HM Revenue & Customs (HMRC).

The problem is that donors may then be faced with a bill for the difference in income tax to be paid back to HMRC. If savers think they will no longer be a taxpayer in 2015/16 due to the 0% savings rate, then they may need to discuss their position with the charity with a view to cancelling their Gift Aid declaration.

We know that you may wish to give to charity but don’t want to be penalised for your good deed, so get in touch with us to find the right solution for you.