Gift Aid is a tax relief for single cash gifts made to UK charities by UK residents.

Each gift must be at least £250 after basic rate tax is taken off. The payment is made to the charity net of basic rate tax by completing form R190(SD) which enables the charity to claim tax back from the Inland Revenue.

For example, if you send £770 to the charity, under the Gift Aid scheme, this is treated as a gift made net of basic rate tax; that is, after tax has been taken off at the basic rate. So, if the basic rate of tax is 23%, this represents a gross amount of £1,000.

The charity currently claims tax back of: £1,000 x 23% = £230. So, a payment worth £1,000 to the charity costs you only £770 if at least £1,000 of your income is liable to tax at the basic rate. In addition, if the higher rate of tax is 40% and you pay tax at this rate, you get higher rate relief of £1,000 x 17% = £170, so a payment worth £1,000 to the charity costs you only £600.