This is a guide to help dentists understand how the tax system can help you increase the size of your donation and obtain tax relief for yourself.
Who can I donate to?
You can donate to anyone. However, it will only be a payment to a gift-registered charity or Community Amateur Sports Club (CASC) that will qualify for tax relief.
Whether it is a dental one or one you have a personal connection to, like a local hospice or one of the many churches, mosques, synagogues, schools and museums registered as charities and with Community Amateur Sports Clubs (CASC), you should have many opportunities to make tax-efficient donations using gift aid.
What is gift aid?
Gift aid is an income tax relief that, once declared, can benefit UK-registered charities and Community Amateur Sports Clubs (CASC).
A word of warning: not all charities qualify for gift aid
Some charities and CASCs do not register for gift aid because of the extra administration, and some can’t register as they are outside of the UK, e.g. Ireland.
Before making any donations you want to claim tax relief on, it’s worth checking if the charity has registered for gift aid and if the sports club is a registered CASC with HMRC.
How do I check if a charity or sports club is registered for gift aid?
You can check conveniently if a sports club is a registered CASC. The list is not updated in real-time, so double-check with the club you donate to confirm they are still registered.
There is no gift aid register to check charities against, but there are charity commission registers where you can search for their contact information.
For the rest of this article, I will refer to CASC as a charity unless otherwise stated.
What are the benefits of gift aid?
- Your donor will receive more – If you donate money to either type of qualifying organisation. They will ask you to make a gift aid declaration allowing them to claim an extra 25p from the government for every £1 you give. You have no further work; the organisation will claim the extra from HMRC.
- You may pay less tax – For higher (40%) or additional (45%) rate taxpayers (anyone with a total taxable income over £50,270 or £125,140), you can claim tax relief for your gift aid donations from HMRC when filing your tax returns. Depending on the rates you pay your taxes, you can get a tax reduction from 25p to 31.75p for every £1 you give, as shown in examples 1 and 2.
- You may pay less of a high-income child benefit charge – if your income is between £50,100 and £60,000, gift aid donations will reduce your income for calculating the amount of your child benefit charge.
What can I gift aid?
Donating money by cash or a bank transfer voluntarily without getting anything significant in return made with a gift aid declaration can qualify for gift aid. Providing certain conditions have been met, the following could also qualify.
- subscriptions
- purchases at charity auctions when the ‘retail value’ of the item is disclosed at the auction and purchased at an excess of its value
- proceeds from the sale of goods you have donated
- memberships
- sponsorships
What can’t I gift aid?
- Gifts of money with a repayment condition
- Payment for items or services, e.g. purchasing tickets to a charity dinner.
- Payment from a limited company
- Payment to participate in an event, e.g. enter a cycle race
- Barter transactions, e.g. providing dentistry services
- Membership fees to a CASC, e.g. golf club
- Gift aid is restricted when you or your family benefits from a payment, e.g. donating in exchange for your travel costs to be paid for a trip to climb Mount Everest.
- Payment of money that doesn’t belong to you, e.g. funds collected from patients for a sponsored silence at work
Example 1 – 25% tax relief for 40% higher rate taxpayers
Darren has taxable profits of £70,000 from his self-employment as an associate dentist and pays income tax at the 40% higher rate.
As a dental student, he was helped financially by the BDA benevolent fund. He remembers this vital support he recived and gives a one-off donation of £100.
Darren has checked they are a registered charity for gift aid. He donates and completes a gift aid declaration for the charity to claim an extra 25%, totalling £25.
He tells his accountant about the donation. The accountant claims tax relief on his tax return.
As a 40% higher-rate taxpayer, Darren saves £25, 25% of £100, making the after-tax relief (NET) cost of his donation £75.
Example 2 – 31.75% tax relief for 45% higher rate taxpayers
David has taxable profits of £250,000 from his self-employment dental practice and pays income tax at the 45% upper rate.
His associate dentist is volunteering for school visits with the Dental Wellness Trust.
He makes a one-off donation of £1,000 to the trust and completes a gift aid declaration as they are a gift aid registered charity. They claim an extra 25% of £250 on David’s donation.
He tells his accountant about the donation. The accountant claims tax relief on his tax return.
As a 45% higher-rate taxpayer, David saves £317.50, 31.75% of £1,000, making the after-tax relief (NET) cost of this donation £682.50.
Example 3 – no tax relief to claim for basic rate taxpayers
Davina has taxable profits of £40,000 from her part-time self-employment as an associate dentist and pays income tax at the basic tax rate.
Davina has decided to support Dentaid, the Dental Charity that provides dental care and oral health advice for people experiencing homelessness and other under-served communities.
Davina donates £100 and completes a gift aid declaration for the charity to claim an extra £25.
She tells her accountant about the donation, who tells her no tax relief is to be claimed as she has not paid tax at the higher rate.
Example 4 – tax to pay for a non-taxpayer
Debbie, an associate dentist, decided to take a sabbatical to volunteer for the UK dental charity Bridge2Aid programme development team.
In the tax year, she takes a sabbatical, works for one month, has taxable profits of £5,000 and has no tax to pay as her income is below her tax-free allowance.
She gives a £1,000 donation to Bridge2Aid and completes a gift aid declaration for the charity to claim the extra £250.
A condition of gift aid is declaring you are a UK taxpayer and paying enough tax to cover the amount of your gift aid. As Davina hasn’t paid enough UK tax to cover the £250 amount of the gift aid, she will need to pay the difference to HMRC on her tax return.
It might seem that Davina has made a mistake by making a gift aid declaration. Her accountant had told her that the donation could be ‘carried back to the previous tax year when she paid tax at the higher rate.
As a 40% higher-rate taxpayer, Debbie saves £250, 25% of £1,000. See example 5 below.
Planning points
- If you make a significant donation and want to know how much tax you will save. You can claim tax relief after the end of the tax year using a ‘carry-back’ shown in example 3- so it may be worth waiting.
- You must complete a gift aid form as evidence of your donation.
- You must have paid tax (Income or Capital Gains) of at least four times your donation amount. If not, you will have to top up any shortfall between the amount of tax you have paid and the charity has claimed.
*Example 5- ‘carry back’ tax relief.
Davina, an associate dentist, decided to take a sabbatical to volunteer for the UK dental charity Bridge2Aid programme development team.
In the tax year, she takes a sabbatical, has no taxable profits of £25,000, gives a £1,000 donation to Bridge2Aid and completes a gift aid declaration. These profits are insufficient to pay tax at a higher rate, and Davina can claim further tax relief.
Her accountant tells her the donation can be ‘carried back to the previous tax year when she paid tax at the higher rate.
As a 40% higher-rate taxpayer, Davina saves £250, 25% of £1,000.
Do I donate from my company or personally?
Donations can be given in your name or if you run a company using your company. There are subtle tax differences to consider between the two options. At the moment, this article only covers the more common personal donations.
I will add to the article an update about making donations from a company. If you need to know about making company donations and can’t wait for my update, please message me, and I will add the update for you.
It’s a complex question to answer. The answer is it depends.
What can’t make a gift aid donation?
- Company
- overseas
- not registered
This is a guide to help dentists understand how the tax system can help you increase the size of your donation and obtain tax relief for yourself.
Who can I donate to?
You can donate to anyone. However, it will only be a payment to a gift-registered charity or Community Amateur Sports Club (CASC) that will qualify for tax relief.
Whether it is a dental one or one you have a personal connection to, like a local hospice or one of the many churches, mosques, synagogues, schools and museums registered as charities and with Community Amateur Sports Clubs (CASC), you should have many opportunities to make tax-efficient donations using gift aid.
What is gift aid?
Gift aid is an income tax relief that, once declared, can benefit UK-registered charities and Community Amateur Sports Clubs (CASC).
A word of warning: not all charities qualify for gift aid
Some charities and CASCs do not register for gift aid because of the extra administration, and some can’t register as they are outside of the UK, e.g. Ireland.
Before making any donations you want to claim tax relief on, it’s worth checking if the charity has registered for gift aid and if the sports club is a registered CASC with HMRC.
How do I check if a charity or sports club is registered for gift aid?
You can check conveniently if a sports club is a registered CASC. The list is not updated in real-time, so double-check with the club you donate to confirm they are still registered.
There is no gift aid register to check charities against, but there are charity commission registers where you can search for their contact information.
For the rest of this article, I will refer to CASC as a charity unless otherwise stated.
What are the benefits of gift aid?
- Your donor will receive more – If you donate money to either type of qualifying organisation. They will ask you to make a gift aid declaration allowing them to claim an extra 25p from the government for every £1 you give. You have no further work; the organisation will claim the extra from HMRC.
- You may pay less tax – For higher (40%) or additional (45%) rate taxpayers (anyone with a total taxable income over £50,270 or £125,140), you can claim tax relief for your gift aid donations from HMRC when filing your tax returns. Depending on the rates you pay your taxes, you can get a tax reduction from 25p to 31.75p for every £1 you give, as shown in examples 1 and 2.
- You may pay less of a high-income child benefit charge – if your income is between £50,100 and £60,000, gift aid donations will reduce your income for calculating the amount of your child benefit charge.
What can I gift aid?
Donating money by cash or a bank transfer voluntarily without getting anything significant in return made with a gift aid declaration can qualify for gift aid. Providing certain conditions have been met, the following could also qualify.
- subscriptions
- purchases at charity auctions when the ‘retail value’ of the item is disclosed at the auction and purchased at an excess of its value
- proceeds from the sale of goods you have donated
- memberships
- sponsorships
What can’t I gift aid?
- Gifts of money with a repayment condition
- Payment for items or services, e.g. purchasing tickets to a charity dinner.
- Payment from a limited company
- Payment to participate in an event, e.g. enter a cycle race
- Barter transactions, e.g. providing dentistry services
- Membership fees to a CASC, e.g. golf club
- Gift aid is restricted when you or your family benefits from a payment, e.g. donating in exchange for your travel costs to be paid for a trip to climb Mount Everest.
- Payment of money that doesn’t belong to you, e.g. funds collected from patients for a sponsored silence at work
Example 1 – 25% tax relief for 40% higher rate taxpayers
Darren has taxable profits of £70,000 from his self-employment as an associate dentist and pays income tax at the 40% higher rate.
As a dental student, he was helped financially by the BDA benevolent fund. He remembers this vital support he recived and gives a one-off donation of £100.
Darren has checked they are a registered charity for gift aid. He donates and completes a gift aid declaration for the charity to claim an extra 25%, totalling £25.
He tells his accountant about the donation. The accountant claims tax relief on his tax return.
As a 40% higher-rate taxpayer, Darren saves £25, 25% of £100, making the after-tax relief (NET) cost of his donation £75.
Example 2 – 31.75% tax relief for 45% higher rate taxpayers
David has taxable profits of £250,000 from his self-employment dental practice and pays income tax at the 45% upper rate.
His associate dentist is volunteering for school visits with the Dental Wellness Trust.
He makes a one-off donation of £1,000 to the trust and completes a gift aid declaration as they are a gift aid registered charity. They claim an extra 25% of £250 on David’s donation.
He tells his accountant about the donation. The accountant claims tax relief on his tax return.
As a 45% higher-rate taxpayer, David saves £317.50, 31.75% of £1,000, making the after-tax relief (NET) cost of this donation £682.50.
Example 3 – no tax relief to claim for basic rate taxpayers
Davina has taxable profits of £40,000 from her part-time self-employment as an associate dentist and pays income tax at the basic tax rate.
Davina has decided to support Dentaid, the Dental Charity that provides dental care and oral health advice for people experiencing homelessness and other under-served communities.
Davina donates £100 and completes a gift aid declaration for the charity to claim an extra £25.
She tells her accountant about the donation, who tells her no tax relief is to be claimed as she has not paid tax at the higher rate.
Example 4 – tax to pay for a non-taxpayer
Debbie, an associate dentist, decided to take a sabbatical to volunteer for the UK dental charity Bridge2Aid programme development team.
In the tax year, she takes a sabbatical, works for one month, has taxable profits of £5,000 and has no tax to pay as her income is below her tax-free allowance.
She gives a £1,000 donation to Bridge2Aid and completes a gift aid declaration for the charity to claim the extra £250.
A condition of gift aid is declaring you are a UK taxpayer and paying enough tax to cover the amount of your gift aid. As Davina hasn’t paid enough UK tax to cover the £250 amount of the gift aid, she will need to pay the difference to HMRC on her tax return.
It might seem that Davina has made a mistake by making a gift aid declaration. Her accountant had told her that the donation could be ‘carried back to the previous tax year when she paid tax at the higher rate.
As a 40% higher-rate taxpayer, Debbie saves £250, 25% of £1,000. See example 5 below.
Planning points
- If you make a significant donation and want to know how much tax you will save. You can claim tax relief after the end of the tax year using a ‘carry-back’ shown in example 3- so it may be worth waiting.
- You must complete a gift aid form as evidence of your donation.
- You must have paid tax (Income or Capital Gains) of at least four times your donation amount. If not, you will have to top up any shortfall between the amount of tax you have paid and the charity has claimed.
*Example 5- ‘carry back’ tax relief.
Davina, an associate dentist, decided to take a sabbatical to volunteer for the UK dental charity Bridge2Aid programme development team.
In the tax year, she takes a sabbatical, has no taxable profits of £25,000, gives a £1,000 donation to Bridge2Aid and completes a gift aid declaration. These profits are insufficient to pay tax at a higher rate, and Davina can claim further tax relief.
Her accountant tells her the donation can be ‘carried back to the previous tax year when she paid tax at the higher rate.
As a 40% higher-rate taxpayer, Davina saves £250, 25% of £1,000.
Do I donate from my company or personally?
Donations can be given in your name or if you run a company using your company. There are subtle tax differences to consider between the two options. At the moment, this article only covers the more common personal donations.
I will add to the article an update about making donations from a company. If you need to know about making company donations and can’t wait for my update, please message me, and I will add the update for you.
It’s a complex question to answer. The answer is it depends.
What can’t make a gift aid donation?
- Company
- overseas
- not registered
