Gift Aid Explained

All charitable donations are 100% tax deductible. This means that if you are a 45% tax payer, for every pound you give to Merchant Taylors’ School it will only cost you 55p. However, this is not always made clear to donors because of the way in which the UK tax system works.

When a donation is made, the tax is reclaimed by both the recipient charity and the donor (if a higher rate tax payer). If you are a standard rate taxpayer and are able to sign a Gift Aid declaration, the recipient charity can claim back the tax, at the standard rate, on your donation. If you are a higher or highest rate tax payer, in addition to the charity reclaiming tax at the standard rate, in your tax return you may reclaim any additional tax that you have paid.

Gift Tax Calculator

Use the calculator below to see how much your gift can be worth to the School and how the cost to you can be reduced if you pay tax above the basic rate.

In order to capture the full benefit of Gift Aid, many people use a Charities Aid Foundation (CAF) account or set up their own charity in which case the amount given represents the full amount of the donation.

Company Matched Giving

Some companies will match some or all of your charitable giving. This is a good way to increase the amount you are able to give to Merchant Taylors' School at no extra cost to you, so it is certainly worth investigating. Your company will be able to tell you whether they do and, if so, to what level they will match. You will usually then have to complete a few forms to enable the gift to be matched. For a non-exhaustive list of companies that match charitable giving, please click here. 

Share Giving

Share giving is now one of the most tax-effective ways to give. When you give an asset to Merchant Taylors’ School, you are treated as making no gain or loss for Capital Gains Tax purposes, so you won’t have to pay any Capital Gains Tax and you are entitled to claim full tax relief equal to the market value of the shares and any associated costs (such as brokers’ fees). If you sold shares to raise cash for a donation, you would have to pay Capital Gains Tax on any increase in the market value of those shares.

To calculate the amount of tax relief, an individual should deduct the value of their donation from their taxable income for the tax year in which the donation is made. The amount they can deduct is the market value of the shares on the day of the gift plus any incidental costs of disposing of the shares such as broker's fees.

Donors can claim relief at their top rate of tax on their Self-Assessment or Corporation Tax return.

For example:
A donor gives Merchant Taylors’ School a gift of 2,000 shares in a company, which he bought for £6,000 and now have a market value of £10,000. The broker's fee, paid by the donor to arrange the transfer is £50. The tax deduction is calculated as follows:

Original cost of shares		£6,000
Current market value of shares		£10,000
Broker’s fee		£50
Deduction against income		£10,050

 

If the donor is paying income tax at the highest rate of 45%, their income tax bill will be reduced by £4,522. This effectively means that the donation of £10,000 will actually cost the donor just £5,528 after tax relief.

The donor will also save the Capital Gains Tax that should have been paid on the increase in the value of the shares (from £6,000 to £10,000), which is £4,000. The current rate of Capital Gains Tax for individuals who pay above the basic rate of tax is 28%. Therefore, in effect, the donation worth £10,000 to Merchant Taylors’ School has only cost them £4,408 (£5,528 - 28% of £4,000).

Qualifying stocks and shares

The shares that qualify for income tax relief are listed or dealt in on a recognized stock exchange, whether in the UK or elsewhere, including shares traded on the Alternative Investment Market; units in a UK authorised unit trust; shares in a UK open-ended investment company (OEIC); and holdings in certain foreign collective investment schemes (schemes outside the UK that are equivalent to unit trusts and OEICs).