Government clarifies effect of income tax changes on Gift Aid

04 Jan 2018 News

The Scottish Parliament in Holyrood

Changes to income tax in Scotland will mean more people can claim back tax on donations to charities, but charities should claim as normal, HM Revenue & Customs has clarified.

The Scottish government has introduced a 19p “starter rate” of tax, which will be the highest rate for anyone earning between £11,850 and £13,850 a year.

Income over £24,000 in Scotland will now be taxed at 21 pence in the pound, while higher rates kick in above £44.273.

HMRC has said that if someone has signed a Gift Aid declaration to say they have paid enough tax, charities will receive Gift Aid at the normal rate of 25 pence per £1 donated. Anyone in Scotland earning over £24,000 can now claim back the difference by asking HMRC to amend their tax code.

Anyone paying the starter rate as their highest rate of tax needs to have paid tax on roughly £1.06 for every £1 they give to charity, in order to correctly sign a Gift Aid declaration.

“Ahead of the devolution of Scottish income tax powers, the government discussed with charities the potential implications for Gift Aid of UK and Scottish income tax rates diverging,” an HMRC spokesman said.

“Having listened to their views and to ensure the effective operation of gift aid across the UK, the government decided that it would not make changes at that time.  This means that charities should continue to claim relief at UK basic rate whether the donor was or was not a Scottish taxpayer.

“The government remains committed to the continued effective operation of Gift Aid in all parts of the UK and will continue to consider all issues affecting this and all other charity tax reliefs as part of its regular dialogue with the charity sector.”


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