Gift aid is a scheme that lets charities reclaim basic-rate tax on donations from UK taxpayers. For each eligible donation the charity recovers an extra amount from HMRC, and higher-rate donors can claim further relief through their tax return.
In one line: Gift aid lets charities reclaim basic-rate tax on donations, boosting the value of each eligible gift.
How gift aid works
A donor makes a gift aid declaration confirming they pay enough UK tax to cover the reclaim. The charity then recovers basic-rate tax on the gross donation, increasing the amount it receives at no extra cost to the donor.
A donor giving 100 GBP allows the charity to reclaim 25 GBP from HMRC, making the gift worth 125 GBP. A higher-rate taxpayer can claim the difference between higher and basic rate on that gross figure through self assessment.
The donor must have paid at least as much income or capital gains tax as the total reclaimed across the year, otherwise HMRC can ask them to make up the shortfall.
Gift aid in practice
Gift aid only works for genuine donations by UK taxpayers, not for payments where the donor receives significant benefit in return. Declarations can apply to a single gift or cover future and past donations.
Unlike marriage allowance, which moves allowance between spouses, gift aid moves tax relief between a donor, a charity and HMRC, and higher-rate donors capture part of that relief themselves.
Primary source: GOV.UK: Tax relief when you donate to a charity