How does Gift Aid interact with the savings rate band? 

This is a freeview 'At a glance' guide.

At a glance

When an individual who is a UK taxpayer makes a cash gift to a charity or Community Amateur Sports Club (CASC), they can make a Gift Aid declaration to allow the recipient of their cash to claim tax relief under the Gift Aid scheme by way of a refund.

  • Non-taxpayers should not sign a Gift Aid declaration otherwise they will be accountable to HMRC for the tax relief claimed back by the recipient.
  • Those on lower incomes should be careful about signing Gift Aid declarations due to the 0% savings rate of Income Tax.
  • From 6 April 2015, the starting rate of Income Tax is 0% for the first £5,000 of savings provided that your combined savings and non-savings income is £17,570 or less for 2022-23 (£17,570 for 2021-22).
  • If you have, for example, £5,000 of gross savings income, and £12,570 of employment income, you have no tax to pay if you have a full personal allowance of £12,570 in the 2022-23 tax year.
  • If you had the income above and made a Gift Aid donation, HMRC may write to you to recover the tax reclaimed by the charity on your donation.
    • If £1,000 were donated under Gift Aid, the charity would recover £250 (£1,000 x 20/80). The donee must pay sufficient Income Tax in the year to cover this reclaimed amount and if they do not HMRC may recover this from them, and not the charity.  

Useful guides on this topic

Savings income: tax on interest
What is savings income? How is savings income taxed? What allowances are available? 

Tax-free savings income
What types of savings income can be received tax-free? What are the limits? 

Savings income: rates and allowances
How do you tax interest? What is the Savings tax allowance?

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