How does gift aid work for charitable donations?
Answered 11 March 2026
Here is a comprehensive explanation of how Gift Aid works for charitable donations under UK tax law.
What the law says
The Relief (ITA 2007, s.414)
An individual who makes a qualifying donation to a charity is entitled to relief. The Income Tax Acts have effect as if:
- (a) the gift had been made after deduction of income tax at the basic rate, and
- (b) the basic rate limit and higher rate limit are increased by an amount equal to the grossed-up amount of the gift.
The "grossed up amount" means the donation amount grossed up by reference to the basic rate for the tax year in which the gift is made.
What is a "Qualifying Donation"? (ITA 2007, s.416)
A gift made to a charity by an individual is a qualifying donation if Conditions A to F are met and the individual gives the charity a Gift Aid declaration. The conditions are:
- Condition A: The gift takes the form of a payment of a sum of money.
- Condition B: The payment is not subject to any condition as to repayment.
- Condition C: The payment is not made under a payroll deduction scheme (ITEPA 2003, s.713(3)).
- Condition D: The payment is not deductible in calculating the individual's income from any source.
- Condition E: The payment is not conditional on, associated with, or part of an arrangement involving the acquisition of property by the charity from the individual or a connected person (an acquisition by way of gift is ignored).
- Condition EA: The payment is not a waiver of entitlement to sums due from the charity in respect of a social investment.
- Condition F: There are no benefits associated with the gift, or any benefits fall within permitted limits.
How the Charity Receives the Tax (CTA 2010, s.471 / ITA 2007, s.520)
When a qualifying donation is made, the charity (whether a charitable company or trust) is treated as receiving the gift under deduction of income tax at the basic rate — i.e., it receives the grossed-up amount. The income tax treated as deducted is treated as income tax paid by the charity, which it can then reclaim from HMRC.
HMRC guidance / practice
The Core Mechanism
"Gift aid is tax relief on money donated to UK charities. We treat donations as if the donor had already deducted basic rate tax from them. The charity can then reclaim this tax to increase the value of a donation."
Donor Requirements
Donors must:
- Pay enough UK income tax and/or capital gains tax to cover the amount of tax the charity will reclaim.
- Give the charity a Gift Aid declaration.
A declaration can cover individual donations, a series of donations, a specified period, or all future donations. It can also be backdated for up to 6 years before the date of the declaration, provided the donation was made after 6 April 2000.
Tax Relief by Rate
| Taxpayer | Relief |
|---|---|
| Basic rate | No further personal relief to claim — the charity reclaims the basic rate tax |
| Higher rate | Can claim higher rate relief by entering donations in the Gift Aid box on the Self Assessment return (the basic rate band is extended by the grossed-up amount) |
Practical Example (Higher Rate)
HMRC guidance illustrates the basic rate band extension: a £40,000 donation grosses up to £50,000 (£40,000 × 100/80), extending the basic rate band by £50,000. This means more income (and gains) fall within the basic rate band, reducing the higher/additional rate tax payable by the donor.
No Liability to Tax
Where an individual has no liability to tax, HMRC will seek to recover the basic rate tax that the charity has reclaimed.
Summary
In short: a donor gives £80 to a charity under Gift Aid. The charity treats this as £80 received after 20% basic rate tax deduction, grosses it up to £100, and reclaims £20 from HMRC — making the donation worth £100 to the charity at no extra cost to the donor. A higher rate taxpayer can additionally claim relief on the difference between the higher rate (40%) and basic rate (20%) through Self Assessment, effectively reducing their own tax bill.
Citation sources
Part 8 Other reliefs Chapter 2 Gift aid The relief Meaning of “qualifying donation” 416 1 A gift made to a charity by an individual is a qualifying donation for the purposes of this Chapter if— a conditions A to F are met, and b the individual , or an intermediary representing the individual, gives the charity , or an intermediary representing the charity, a gift aid declaration relating to the gift (see section 428). 1A For the purpose of subsection (1)(b) an intermediary is— a a person authori
Part 8 Other reliefs Chapter 2 Gift aid The relief Relief for gifts to charity 414 1 An individual who makes a gift to a charity which is a qualifying donation is entitled to the relief set out in subsection (2). 2 The Income Tax Acts have effect in their application to the individual for the tax year in which the gift is made as if— a the gift had been made after deduction of income tax at the basic rate, and b the basic rate limit and the higher rate limit (see section 10 ) and additionally, i
rate band An individual has income after allowances of £30,000 in 2018-19. She realises a gain on a painting of £70,000 in December 2018 and makes a gift of £40,000 to charity January 2019 that qualifies for gift aid relief. The annual exempt amount is £11,700 and the basic rate band is £34,500. The amount of the gain that is chargeable to Capital Gains Tax is £58,300 (£70,000 less £11,700). The gift is treated as having been made after deduction of income tax at the basic rate of 20% (The basic
Gift aid is tax relief on money donated to UK charities. We treat donations as if the donor had already deducted basic rate tax from them. The charity can then reclaim this tax to increase the value of a donation. Gift aid rules Donors must Pay enough UK income tax and / or capital gains tax themselves to cover the amount of tax the charity will reclaim Give the charity a gift aid declaration A declaration can be made to cover individual donations, a series of donations, can cover donations made
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