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Carry back charitable donations

30 May 2024

If you are a higher rate or additional rate taxpayer you have the option to carry back your charitable donations to the previous tax year.

As a higher or additional rate taxpayer, you can actively carry back your charitable donations to the previous tax year. You must request this carry-back before or when you file your self-assessment return for that year.

Imagine you make a charitable donation gift in the current 2024-25 tax year, ending on April 5, 2025. You can then accelerate the tax repayment associated with your donation. This strategy proves useful for maximizing tax relief, especially if you paid higher rate tax in the previous year but not in the current one. You should include your formal carry-back claim in the self-assessment tax return for 2023-24, due by January 31, 2025.

Your charitable donations must qualify for gift aid to claim this benefit. Also, the total donations from both tax years should not exceed four times the tax you paid in the previous year.

If you don’t file a tax return, you’ll need to fill out a P810 form to claim.

As a higher or additional rate taxpayer, you can claim extra tax relief on the difference between the basic rate and your highest tax rate. For instance, if you make a charitable donation of £5,000, the charity receives £6,250 with gift aid. Depending on your tax rate, you can claim:

  • £1,250 at the higher tax rate of 40% ((£6,250 \times 20%)),
  • £1,562.50 at the additional tax rate of 45% ((£6,250 \times 25%)).

This provision encourages charitable donations by offering tax advantages, ensuring your generosity benefits both the charity and your finances. By leveraging these tax provisions, you align your philanthropic actions with financial planning.

Source: HM Revenue & Customs Tue, 28 May 2024 00:00:00 +0100

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