If you haven’t yet submitted your tax return for 2015/16 it may not be too late to use a charitable gift to reduce your tax bill.
Although 2015/16 is long gone you are allowed to carry back donations made in 2016/17, prior to the submission of your 2015/16 tax return, to 2015/16. As the deadline for Self Assessment is the 31 January, there is only a short window of opportunity to take advantage.
In certain cases making a charitable gift under gift aid can reduce your tax by more than your highest tax rate. This applies if you are in a situation where your income level is being used to restrict your level of personal allowance, determine child benefit claw back or stop the transferable allowance for married couples.
If you earn over £100,000 a year, for example, your personal allowance starts to reduce by £1 for every additional £2 of income. A gift aid donation reduces your income for the calculation of these restrictions so that the penalty for having income over a certain level is reduced or removed.
The rate of relief for a gift can be up to 60 per cent as you regain your personal allowance, or an even higher percentage depending on the level of child benefit you receive.
At its most extreme for the transferable allowance for married couples, where if you are just £1 over the limit you lose all £210 of relief, an 80p net donation might reclaim the entire allowance.
‘If you have income in, or just above these marginal positions, it is worth considering a carry back of gift aid donations you have already made, or advancing one you planned, to take your income further down within or below the thresholds.'
‘Sadly if you have already submitted your return, it is too late to amend it to claim this relief, it’s one case where efficiency is actually penalised. However, you can still start planning for next year. Giving to charity is always rewarding for your soul, but it may also be more financially rewarding than you think.’
According to recent report from the Charities Aid Foundation, charitable donations in the UK fell slightly in the last year to £9.6bn, down from £10.1bn in the previous year.