I have paid some money to charity in 2004 and am doing my self-employed accounts, due in several days time.
Questions:
Thanks,
Jon
It's probably going to work out the same, but it's administratively easier to do it privately via Gift Aid.
You paid net of standard rate. For every £78 given, the charity will reclaim £22 directly from the taxman, to make it the same as if the whole £100 you earned all went to the charity, i.e. the £22 tax you paid from the £100 left you with £78 to give, and the charity hits the taxman for these £22 he took from you.
If you're a standard rate payer, that's the end of it.
If you pay tax at higher rate, nothing changes for the charity, but you claim the other £18 back from the taxman. The theoretical cash flow is like this: You earn £100, taxman takes £40 off you. You then give the charity those £60 and another £18 you borrowed from your teenage daughter. The charity then acts as before and gets £22 from the taxman and has the whole £100 you earned. The taxman gives you back the other £18 and you can repay your daughter.
In practice, this "giving back of £18" doesn't actually happen, but rather your standard rate tax band is artificially widened by £100, with the result that £100 more of your other income is taxed at
22% instead of 40%.Thank you for the detailed explanation. The money has already come out of my personal account in 2004 for these charity payments. With Gift Aid, do I need to have filled in a form at the beginning when I made payments or do I just need to fill in a form now?
You can do it now. Get the form from the charity and give it back to them. You don't need to retain a copy.
Most charities now use the new-style wording on their Gift Aid Declaration forms, which is retro-active for all donations made since Gift Aid came into force, which happened on 6th April 2000.
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