Half of all higher rate taxpayers are unaware they can reclaim 20% personal tax relief on their charitable donations in their self assessment tax return, according to research commissioned by the Charities Aid Foundation.
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 2007/8 £230 million was returned by HMRC to higher rate taxpayers in tax relief on charitable donations.
The research was carried out by GfK NOP amongst 243 higher rate taxpayers. It found that the process of giving personal tax relief directly back to charity through their self-assessment tax return is actually putting off some higher rate tax payers.
Although 52% initially said they were likely to give their tax relief directly back to charity, once the process was explained in full, only one in four (24%) said they would.
The research also found that only two-fifths (39%) of those who were aware of this tax break had actually reclaimed their personal tax relief in the past. However, 60% of those previously unaware said they would now reclaim this relief.
For every £1,000 donated to charity, the government will add £282.00 through Gift Aid. The 20% personal tax relief on the entire original donation (original tax-break included) is worth a further £250, and if this is also returned to charity by the taxpayer, an extra £70 is automatically added to it through Gift Aid. This means that for every £1,000 donation by a higher rate taxpayer £1,602 can go to charity.
Sheila Hooper, Marketing Director at CAF, said: “With over half saying that they would be likely to give this tax relief back to charity, charities across the UK are potentially missing out millions of pounds at a time when they are ever more stretched financially”.
She added that a CAF Charity Account or Trust could help higher-rate taxpayers maximise their charitable donations in this regard. Its regular statements, just like a bank account, are designed to help make it easier to fill out the self-assessment tax return and claim the 20% personal tax relief.
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