www.wonershchurch.com
Making the Most of your Giving
 
Any queries on giving should be addressed to Tony Pratt or Maureen Nolan.
 
Check out Tax-Efficient Giving | Church of England and the Inland Revenue site HM Revenue & Customs: Welcome to HMRC Charities
 
With acknowledgements to the Parish of Cove from whose website this has been blatantly copied!
 
To be classed as a taxpayer a person must bear tax on their income, either by deduction at source (PAYE), or investment & savings income, or by direct payment to the Inland Revenue, including Capital Gains.  The giver must have paid a tax amount that at least equals the tax being reclaimed on the donation.
 
When a tax payer makes a donation to a registered charity, such as the Church of England, the charity is able to reclaim from the Inland Revenue the tax originally paid by the donor and hence increase the effective value of the donation.  Under the Gift Aid Scheme all giving - one-off, occasional or regular - is eligible for the tax relief, and there is no lower limit on the size of donation or on the length of any commitment to regular giving.  The only requirement is for the donor to complete a simple Gift Aid declaration.
 

There are no minimum limits associated with one-off donations nor does a person making regular donations have to commit themselves to a minimum period. Here's how it works in practice:

  • For single donations the donor completes and signs a simple Gift Aid declaration.  This declaration is passed to the church together with the donation.  The church will be able to supply copies of a suitable declaration for completion.
  • For regular donations the donor should first contact the Gift Aid Secretary to advise of his or her intention.  The church will then arrange to keep a record of the donations (the Inland Revenue requires that the church maintains an audit trail of giving) and supply the donor with a Gift Aid declaration for completion.

 

Parishioners can obtain blank  PCC Gift Aid Declarations or DCC Gift Aid Declarations from the Church Office.

 

 

At the moment every £100 net income under gift aid increases to £128 including tax refundable, but will reduce to £125 after 6 April 2008.

 

On net income of say £100,000 this would reduce total income by £3,000.

 

Higher rate taxpayers should be particularly encouraged to increase their giving, as they will receive extra tax relief (18% now, increasing to 20% on the grossed up contribution).

 

The calculation is that for every £100 previously given, this could be increased to £102.56 (a 2.56% increase), without any increase in the after tax cost by a higher rate taxpayer.

 

 

 

Blue Envelopes –Reclaiming Tax on Cash Donations

To enable the Church to obtain Tax Refunds on your giving, the Tax Office needs us to establish how much you have given.  The best way of proving this is if you either give by direct debit to the PCC bank account or by cheque.  However, if this is not possible or convenient, and if you pay tax in the UK, then we should be grateful if you could place your cash donations in the blue envelopes so that the Inland Revenue have proof of the amounts paid.  Cash left loose in the plate will be ineffective for tax purposes.

 

 

Tax calculations
 

This explains the details of the tax calculations relating to charitable giving under the Gift Aid scheme, including the position for higher rate tax payers.

  • For every £100 of earned income, a taxpayer (paying tax at the basic rate) pays £22 in tax and retains £78.

i.e. Income received

  =  

0.78 x Income earned, and

Tax paid

  =  

0.22 x Income earned
  • Therefore:

Tax paid

  =  

(0.22/0.78) x Income received, or

Tax recovered by charity

  =  

(0.282) x Giving

 

For every £1 that you donate the church can recover 28p.  
For every £100 that you donate the church can recover £28.
 
Taxpayer donation is net                            £100.00
Charity recovers tax of £100 x 22/78             £ 28.20
Gross donation is deemed to be                  £128.20

No effect on taxpayer unless higher rate of tax applies

Lower and basic rate tax payers

The church recovers 28p for every pound that you donate.  Your giving has no net effect on your tax bill.  Lower rate tax payers must ensure that they have paid, or expect to pay during the tax year, at least as much tax as the church or charities will seek to recover from the Inland Revenue.  The table below will help you to decide whether you have paid, or will pay, enough tax to meet this requirement.

 

Tax paid in year

Maximum Gift Aid donations

10

35

20

70

50

175

100

350
 
Higher rate tax payers

The effect on your tax bill of a charitable donation is determined by the Inland Revenue as follows:

  • The donation is 'grossed up' (i.e. converted to the equivalent income before tax) assuming tax has been paid at the basic rate of 22%: Gross income = (Donation/0.78)
  • This amount is treated as an allowance - which has the effect of reducing your tax bill by (Donation/0.78) x 0.4
  • The tax paid on the donation is then added back, at the basic rate, to your tax bill.

Therefore, if you pay tax at the higher rate of 40%, your tax bill is reduced by (Donation/0.78) x 0.4 and increased by (Donation/0.78) x 0.22.

 

Hence the net effect is a reduction in your tax bill of (Donation/0.78) x (0.4 - 0.22) or Donation x 0.231.


Taxpayer as below donates net                             £130.00
Gross donation deemed to be                               £166.67
Total tax relief for taxpayer 40% x 166.67              £66.67
Tax relief at source and charity recovers                 £36.67
Further tax relief and actual reduction in
tax liability for taxpayer  66.67 - 36.67                   £30.00

This can also be calculated at £166.67 x 18% =      £30.00

 

A higher rate tax payer can make a donation of £130 at a net cost to him or her of £100 and the church can reclaim £37.
 
 
www.wonershchurch.com