Gift Aid Increased Donor Benefit Limits

Gift Aid is the scheme whereby a charity can reclaim the basic rate of tax paid by donors who are UK tax payers and who have paid an equivalent amount of tax to that which the charity will reclaim on the donation. Donors who are higher rate tax payers can also currently reclaim the difference between the basic and the higher rate of tax on their personal tax returns. This is an incentive for higher rate tax payers to give to charity.

A charity can give donors modest tokens of appreciation in acknowledgement of their gifts but the law limits the value of such tokens (known as "donor benefits").

The current limits are set out in the table below:

Amount of Donation - £0 - £100
Benefit Value Limit - 25% of the donation

Amount of Donation - £101 - £1,000
Benefit Value Limit - £25

Amount of Donation - £1,0001 - £10,000
Benefit Value Limit - 5% of the donation

Amount of Donation - Above £10,000
Benefit Value Limit - £500 (maximum)

The Finance Bill 2011 ("the Bill") is currently working its way through Parliament and is soon to receive Royal Assent to become the Finance Act 2011. When the Bill is enacted it will increase the maximum value of the benefit for gifts over £10,000 from £500 to £2,500. This is part of a drive to encourage charitable giving by enabling charities to give more generous tokens of appreciation to their biggest donors.

The new limit of £2,500 will be subject to the existing rule that the maximum value of the benefit cannot exceed 5% of the gift to qualify for the Gift Aid scheme.

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.