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How does Gift Aid work?

Gift aid is a scheme only available to UK taxpayers. You may often come across it when entering museums or dealing with other institutions which are registered charities.

Any payment you make to these institutions will be treated as a payment which has already undergone a tax deduction. The charity can claim back the relief, therefore increasing the value of your payment or donation.

You must give the charity concerned a Gift Aid declaration, stating that you are a UK taxpayer and giving your name and address. If you do this over the phone, the charity no longer has to send you a written record of the declaration but you can request one. Keep a copy of any declarations.

Some charity shops operate a ‘retail Gift Aid scheme’ which enables you to make a Gift Aid donation instead of simply giving your unwanted items to the shop. The scheme works as follows: the shop acts as an agent selling your unwanted goods for you through the shop. The goods remain yours throughout the process and you are entitled to keep the proceeds of the sale but may choose to donate them to the charity, in which case you can use the Gift Aid scheme for the donation.

Be aware that you could be liable for capital gains tax under the normal rules if you sell a very valuable item this way and, if you use the scheme to sell items regularly – for example, cards or crafts you make – the Revenue may tax you as if you are running a business.