- October 21, 2010 at 10:37 am
Hi. From what I gather, any tax paying individual can donate to charity under the Gift Aid scheme in order to reduce their income tax liability (by extending his/her basic rate band on payment of the donation) since HMRC will pay the rest for him/her. Is this true? I’m ready to give an example if someone says NO. Please respond here on forum, and also copy here … earreybhit @yahoo.com
ThanksOctober 24, 2010 at 4:01 pm
Thanks, superwoman …. WOW, you are an ACCA TUTOR!! I’m so reassured! OK, so you mean that one way to make HMRC spend money is to spend money yourself, right? And this expenditure does not bother them as long as the donator is doing good (helping charities) right?
Secondly, I noticed that donating makes donator’s OVERALL tax liability LESS (by the difference between the grossed and net figures paid e.g 375 and 300 respectively) .. i.e, if he didn’t contribute, it would be more. Can you also confirm this? If true, why wouldn’t any taxpayer simply donate to charity under this scheme, not really for goodness’ sake, but to reduce his/her tax liability? (this particular point is very important, and I really wish you could brief me on it).
Thanks a lot, and being a tutor, I understand your commitments and hence the reason why you can’t contact me by email.
CryeOctober 24, 2010 at 5:51 pm
OH yes, superwoman! How will we ever be able to repay Open Tuition.com?!! You helped immensely!! …this part of my worry is ALL answered here …
“Also although there are tax breaks individuals still have to pay out. If I am a higher rate taxpayer the charitable payment is still costing me 60% of the gross amount going to charity. I am still out of pocket. Individuals have to have the funds to pay for charity as the tax break is only a % of the payment”
In any case also, as I now understand, donating to charity through this scheme “costs” HMRC, even as it’s still coming from your payments from previous years! … i.e, if I want HMRC to spend TOO, I just need to donate.
OK, I have another worry …. HOW does this basic/initial 20% relief (on ALL gift aid taxpayers) work? I can understand the additional relief on donating higher rate taxpayers (i.e by extension of basic rate band, and therefore more income being taxed at 20 rather than at 40%). BUT that basic 20% relief is unclear to me. E.g. they say since the basic rate taxpaying gift aid donors ALREADY benefit from 20%, they don’t have further relief. This 20% … how come? WHERE is the difference if for example, a basic taxpayer didn’t donate (because the computation is SAME/ignored!!)?
Please, exercise your kindness and patience once again!
CryeOctober 24, 2010 at 10:35 pm
Dear Superwoman …thanks again. I quite understand the first part. But the second part won’t enter …”If I am a basic rate taxpayer I have had my
20% saving at source”. Please can you briefly outline to me in a very simple way – maybe the steps – how this 20% is “saved at source”, and a possible EXAMPLE of this source?
Sir/Ma’am, maybe a simple and clear example of the summary of the process/concept will do very well, especially if you supplement by [immediately after outlining the steps/way of “saving at source”] CONTRASTING this with the situation in which he doesn’t donate/save at source at all.
Maybe tense, I’m just thinking too far and rather blurring my view, but I know as soon as this simple one enters, it will stick.
Thanks, ever so much!October 25, 2010 at 9:32 pm
Ok, thanks, superwoman. You did your best. I will see that lecture as advised!
Accept my regards as well.
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