Make every donation go further: A quick guide to Gift Aid and the small donations scheme

As we approach a season of generosity with World Kindness Day (13 November), National Philanthropy Day (15 November) and Giving Tuesday (2 December) now is the perfect time for charities to ensure they’re making the most of every donation.

Two key HMRC schemes can help you do just that: Gift Aid and the Gift Aid small donations scheme (GASDS).

Gift Aid: Add 25% to eligible donations

Gift Aid allows registered UK charities to claim an extra 25p for every £1 donated by UK taxpayers. Introduced in 1990 and significantly expanded in 2000, Gift Aid has helped charities unlock billions in additional funding over the past 35+ years.

To qualify:

• Your charity must be registered with HMRC
• Donors must complete a valid Gift Aid declaration
• Donors must have paid enough UK tax to cover the claim
• Encourage donors to tick the Gift Aid box when donating online, in person or via fundraising platforms

Tax benefits for donors

Gift Aid doesn’t just benefit charities, individual donors can also claim tax relief:

• Higher-rate (40%) and additional-rate (45%) taxpayers can claim the difference between their rate and the basic rate on their donation through their self-assessment tax return
• For example, a £100 donation could result in an additional £25 for your charity and the donor could claim back up to £25 themselves, depending on their tax rate

This makes Gift Aid a win-win: more funds for your charity and potential tax savings for your supporters.

GASDS: Claim without declarations

The Gift Aid Small Donations Scheme enables you to claim a 25% top-up on cash or contactless donations of £30 or less, even without a Gift Aid declaration.

Key points:

• Claim up to £2,000 per year.
• Your charity must have claimed Gift Aid in the same tax year.
• Donations must be collected in the UK and meet eligibility rules.

This is ideal for collections at events, donation tins, or contactless devices, especially during seasonal campaigns.

What charities need to do to stay compliant

To benefit from Gift Aid and GASDS, charities must meet several compliance obligations:

1. Register with HMRC

Your charity must be registered with HMRC and have a valid Gift Aid reference number. This is separate from registration with the Charity Commission or OSCR.

2. Collect valid Gift Aid declarations

Each donor must complete a Gift Aid declaration – written, online, or oral (if confirmed in writing). It must:

• Confirm the donor is a UK taxpayer
• Authorise the charity to claim Gift Aid
• Include the donor’s name, address and date

3. Ensure donor eligibility

Donors must have paid enough UK income tax or capital gains tax in the tax year to cover the amount the charity is claiming. If not, HMRC may recover the difference from the donor.

4. Maintain accurate records

Charities must keep:

• Copies of Gift Aid declarations
• Donation records
• Audit trails linking donations to declarations

These records must be retained for at least six years.

5. Understand benefit limits

If donors receive any benefit (e.g. event tickets, merchandise), it must fall within HMRC’s strict limits:

• Up to £100: benefit must not exceed 25%
• £101-£1,000: capped at £25
• Over £1,000: max 5%, up to £2,500

6. Submit claims correctly and on time

Gift Aid claims must be submitted using HMRC’s online system. Claims can be made:

• Up to four years after the end of the tax year in which the donation was received
• For GASDS, claims must be made in the same tax year as a valid Gift Aid claim

7. Train staff and volunteers

Everyone involved in fundraising should understand:

• What qualifies for Gift Aid
• How to explain the scheme to donors
• How to collect and record declarations properly

8. Use approved systems for retail Gift Aid

If your charity sells donated goods (e.g. in a shop), you must use HMRC-compliant systems to track sales and confirm donor consent to treat proceeds as donations. This falls under the Retail Gift Aid Scheme, which allows charities to claim Gift Aid on the proceeds from the sale of donated items, provided certain conditions are met.

To comply:

• The charity must act as an agent for the donor, selling goods on their behalf.
• The donor must sign an Agency Agreement and a Gift Aid declaration confirming they are a UK taxpayer and agree to donate the sale proceeds.
• Each item must be linked to the donor via a tracking system (e.g. EPoS) and labelled accordingly.
• Donors must be informed of the sale value and given the opportunity to opt out before Gift Aid is claimed.
• Records must be stored securely and reviewed regularly to ensure declarations are in place.

Make the most of the giving season

• Review your processes: Are you capturing all eligible Gift Aid declarations
• Train your team: Ensure staff and volunteers understand the schemes
• Stay compliant: Keep accurate records and submit claims on time

Although these schemes have been in place for some time, they are not entirely straightforward. Charities can unintentionally breach regulations if practices are not regularly reviewed, monitored, and updated in line with HMRC guidance.