Tax rules
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I think the way it works is that if you are a higher rate taxpayer, you are entitled to claim the difference between the basic rate (20%), and the higher rate (currently 40%) on the gross value of your gift if you gift aid it.
As an example, for a gift of £100, the gross value would be £125 and a higher rate taxpayer could claim back 20% of this – which is £25, in effect only spending £75. (The charity would actually get approx £128 rather than £125 for the moment, but that is another story and something to do with transitional relief because the basic tax rate changed last year.)
So, an initial donation of £100 actually costs you just £75 if you’re a higher rate taxpayer and gives the charity £128 leaving the taxman with nothing...
Hope I haven’t made things more complicated here
As an example, for a gift of £100, the gross value would be £125 and a higher rate taxpayer could claim back 20% of this – which is £25, in effect only spending £75. (The charity would actually get approx £128 rather than £125 for the moment, but that is another story and something to do with transitional relief because the basic tax rate changed last year.)
So, an initial donation of £100 actually costs you just £75 if you’re a higher rate taxpayer and gives the charity £128 leaving the taxman with nothing...
Hope I haven’t made things more complicated here
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FirstTimeBuyer
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LLL has described it best.
You are paying out of taxed income. The basic rate tax which you already paid will be claimed by the charity. The higher rate tax will be repaid to you (or reduce any other tax liabilities you might have).
There is a box on your tax return to ask the Revenue to make your repayment or part of the higher rate tax bit, directly to a specified charity.
zzzzzzzz
TIPSY I think your question is misconceived.
The £100m in tax repayments or so that those Indie schools that operate as charities receive is mainly in the form of not paying tax on investment income. You can be certain that it mostly goes to relatively few schools (CH, Eton etc).
These schools receive little in charitable donations. We pay enough!
As a number (£100m) it is much smaller than the £300m or so that the Indies pay out in bursaries and scholarships.
It is only a tiny fraction of the £5bn the schools save the government by educating 7% of the school population.
The importance of the charitable status is that without it you have to close down, irrespective of how much money you have. It acts as the equivalent of having your licence to be a school taken away, and you cannot in law turn around and simply operate as a limited company or other form of entity.
You are paying out of taxed income. The basic rate tax which you already paid will be claimed by the charity. The higher rate tax will be repaid to you (or reduce any other tax liabilities you might have).
There is a box on your tax return to ask the Revenue to make your repayment or part of the higher rate tax bit, directly to a specified charity.
zzzzzzzz
TIPSY I think your question is misconceived.
The £100m in tax repayments or so that those Indie schools that operate as charities receive is mainly in the form of not paying tax on investment income. You can be certain that it mostly goes to relatively few schools (CH, Eton etc).
These schools receive little in charitable donations. We pay enough!
As a number (£100m) it is much smaller than the £300m or so that the Indies pay out in bursaries and scholarships.
It is only a tiny fraction of the £5bn the schools save the government by educating 7% of the school population.
The importance of the charitable status is that without it you have to close down, irrespective of how much money you have. It acts as the equivalent of having your licence to be a school taken away, and you cannot in law turn around and simply operate as a limited company or other form of entity.
Exams are formidable for the best prepared. The greatest fool may ask what the wisest man cannot answer.
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T.i.p.s.y
Found this:
http://www.hmrc.gov.uk/CHARITIES/tax/giving/payroll.htm
says taxable income is reduced. I wonder if you are in the 40% threshold and you pay £2k to the charity which reduces your taxable income to below the 40% threshold if you will then pay 20% tax on the rest of your salary?
http://www.hmrc.gov.uk/CHARITIES/tax/giving/payroll.htm
says taxable income is reduced. I wonder if you are in the 40% threshold and you pay £2k to the charity which reduces your taxable income to below the 40% threshold if you will then pay 20% tax on the rest of your salary?
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FirstTimeBuyer
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- Joined: Wed Feb 25, 2009 10:34 am
- Location: S East
Yes, but then you only would pay 40% on the little bit above the threshold if you didn't make the donation.T.i.p.s.y wrote:Found this:
http://www.hmrc.gov.uk/CHARITIES/tax/giving/payroll.htm
says taxable income is reduced. I wonder if you are in the 40% threshold and you pay £2k to the charity which reduces your taxable income to below the 40% threshold if you will then pay 20% tax on the rest of your salary?
Exams are formidable for the best prepared. The greatest fool may ask what the wisest man cannot answer.
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Sassie'sDad
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- Location: Rugby
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T.i.p.s.y
