Higher-rate taxpayers missing out on tax relief

Higher-rate tax payers have missed out on £200m in tax relief on charitable donations, reports the Charities Aid Foundation (CAF).

Research for CAF by GfK NOP found that half of higher-rate taxpayers are unaware that they can reclaim 20% personal tax relief on their charitable donations in their self assessment tax return.

A donation made by a higher-rate tax payer enables a charity to receive basic rate personal tax relief, and at present, a further two per cent transition amount. The tax payer must claim the remaining 20% and can choose to give it directly to charity.

If a higher-rate tax payer donates £1,000 to charity and donate the personal tax relief to the charity, £1,602 can go to charity.

The research also found that higher-rate taxpayers were put off giving their tax relief directly to charity through their self-assessment tax return by the process required. Although 52% said they were likely to give their tax relief directly to charity, only 24% said they would when the process was explained.

“The choice as to whether to donate this relief back to charity or keep it is, of course, up to each individual. But with over half saying that they would be likely to give this tax relief back to charity, charities across the UK are potentially missing out on millions of pounds at a time when they are ever more stretched financially,” said Sheila Hooper, marketing director at CAF.

The research is part of a wider study about tax-efficient giving, due to be published in March.

The finding echo those reported in research published by HM Revenue & Customs, Charitable Giving by Wealthy People (April 2007), available on the HMRC website.