Tax changes hit gift aid

In our March article ‘Use it or lose it’ we commented about the way in which changes in the 2016/17 tax year could affect gift aid. This is such an important subject, particularly for charities and for those who make regular donations, that it deserves an article on its own.

Let’s start by looking at the tax changes which could potentially affect gift aid donations:

  • Personal allowance increase to £11,000.
  • A new dividend tax allowance of £5000 above which basic rate taxpayers will pay 7.5% on dividends, higher-rate taxpayers 32.5% and additional-rate taxpayers 38.1%.
  • A new personal savings allowance of £1000 for basic rate taxpayers and £500 for higher rate taxpayers.

In theory this means that an individual could have income of £17,000 and pay no tax at all. As a result, they would be unable to gift aid any donations which they make to charitable organisations. Should they continue to make a gift aid declaration then the tax authorities are likely to pursue them for payment as well as reclaiming the over-payment from charities themselves.

In order to avoid this scenario, charities should be looking to:

  • change the wording on any gift aid donation forms,
  • update their advice on gift aid on their websites and other publications,
  • give appropriate training to their employees and volunteers,
  • identify ongoing donations with a view to checking the tax status with donors.

If you would like to speak to a tax adviser about the implications of new taxation rules in respect of your tax position, please contact Newshams Tax Advisers on 0800 211 8657 or email us at