The running cost of Gift Aid

On Sunday morning, I'll be full of admiration for everyone participating in the London Marathon. As each year passes, do you feel that you are increasingly sponsoring people facing their awe-inspiring personal challenges? I certainly do, and it got me thinking, I wonder how the UK Government's finances are bearing up to these endeavours and our associated generosity? Gift Aid was introduced on 1 October 1990, by the then Chancellor of the Exchequer, Sir John Major. The way it works is that if a taxpayer donates £10 to charity and makes the Gift Aid declaration, the charity receives £12.50 by recovering the basic rate tax which the taxpayer has already paid on this amount. If the donor pays tax at higher rates, they can personally reclaim the additional tax over the basic rate. So how much does this cost the Government? My review of HMRC’s data on UK charity tax reliefs[1] shows that charities reclaimed £10m in 1990, when Gift Aid started. The latest stats show this has increased to £1.26bn in 2016 and looking at the increase in the last five years alone, Gift Aid reclaimed by charities has increased by 31% – no wonder we all feel like we are sponsoring people more and more! Putting this into context, HMRC’s tax receipts over the same period have increased by 18%[2] only. With so many of us looking for new ways to challenge ourselves, and being sponsored to do so, it seems the cost of Gift Aid to the Government will continue to increase, and charity will continue to be at the heart of our nation. Good luck on Sunday everyone - rather you than me - I will never cease to be impressed!

 

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