After Christmas
If you receive presents at Christmas and do not want them then you can take them to various charity shops and the charity will potentially be able to claim Gift Aid relief and you may potentially be able to claim higher or additional income tax relief on your self assessment return.
Gift Aid only applies to gifts of money, but many charity shops will act as agents for private individuals and sell goods on their behalf so at the point of sale the goods belong to the individual. The charity can then ask the owner of the goods to donate the sale proceeds to the charity (usually by letter or e-mail).
If the owner agrees to donate the sale proceeds to the charity then Gift Aid can be claimed by the charity on the net sales proceeds subject to all other Gift Aid conditions being satisfied, for example the owner of the goods has the right to keep all of the net proceeds of the sale, but can choose to donate all or part of the proceeds if they wish. Also, the goods must belong to the individual personally and not to any other person and of course the scheme isn’t available to non-taxpayers.
Payroll giving
As an alternative to Gift Aid employees can make regular gifts of any amount in a tax-efficient manner through an employer’s payroll system. Payroll giving provides income tax relief at source. The employee instructs the employer to make regular payments by deduction from salary to a charity or a charitable clearing house. Donations are made out of income before income tax is taken off, but after national insurance deductions have been made based on the employee’s gross amount of pay before payroll giving donations are deducted. This means donors are given tax relief on their donation immediately – and at their highest rate of tax.
If the amount of the payment is more than the employee’s pay on which tax is deducted, then relief is restricted. Therefore as with Gift Aid, no benefit in non-taxpayers using this scheme. In addition, as with gift aid there is no maximum or minimum payment under this scheme.
The main problem is employers must have a scheme in place; you can't just do it on your own. Individuals should therefore ask their finance department if the firm runs a scheme. If not it may be worth trying to encourage it as it is a simple process run through the automated payroll. Unfortunately those who are self-employed sole traders can't access payroll giving.
