Ringing and Money
8. Gift Aid and the Retired
One of a series of articles on Ringing and Money by Steve Coleman
The third Thursday each month is our day for The Dodging Codgers. We’re all retired and we ring at one tower in the morning and another in the afternoon, with a pub lunch in between. Most of us learnt later in life and we don’t ring anything advanced, but we have a good time in pleasant company and we – ever so slowly – make progress.
Lunchtime conversation is always varied, intelligent and stimulating, and yesterday we talked about the rehang projects we’re supporting. From there we got onto Gift Aid, and several people were so surprised when I told them you said they might get tax back if they gave, that they didn’t believe me. Can you explain it?
Certainly I can. But first, what splendid things midweek ringing groups are! There are now lots of them everywhere and they’re definitely the future. Mostly they cater for the retired – although these days there are even Mother and Toddler midweek groups too – and they’re especially valuable to those who take up ringing when no longer in the first flush of youth.
Many of them have names like yours – round here we have The Wrinklies, The Far Cited Ringers, and The Midweek Dodgers – and they normally have no rules and no membership fees, although those attending contribute to the tower donations. If you haven’t got one in your area, do think about starting one. You certainly won’t regret it.
But getting back to tax, we’re talking here about Gift Aid payments to charities made by people who are 64 or over. Those payments include your Ringing Association subscription if it’s a charity, as well as your payments to rehang projects and belfry repair funds. We looked at the Gift Aid system in general in Chapter 2, but once you’re over 64 there are some extra wrinkles that are well worthwhile looking out for.
The system works like this. Anyone who has already had their 64th birthday when the new tax year starts on 6th April gets an age-related personal allowance, and that’s in addition to their normal personal allowance. This year it’s £2,995 for people aged between 64 and 74 – making £9,030 of allowances altogether – and it’s £3,145 for people over 74 – making £9,180 altogether.
But because the age-related personal allowance is not intended to benefit the better off, if your total taxable income is greater than something called, the Income Limit for Age-Related Allowances – which this year is £21,800 – you won’t get your full age-related personal allowance.
And if your total taxable income exceeds the Income Limit for Age-Related Allowances by more than twice the amount of the age-related personal allowance, you won’t get any age-related personal allowance at all.
A Deep Breath
Time for a deep breath here, I think, and if you want to read those last three paragraphs again very slowly, feel free. This is one of those areas where a wet towel round the head certainly helps. In truth, tax doesn’t need to be anywhere near so complicated; it’s just that a succession of governments have spent the last 50 years adding one complexity after another with the aim of making everything fairer.
And as one last complexity, if your income is above the income limit but not well above it, your age-related personal allowance is reduced by £1 for every extra £2 of your income.
And if you’d like to see this set out algebraically, here it is – although if you wouldn’t, just go straight to the next section instead.
So in this tax year 2008/2009, where:
T is your total taxable income
P is the age-related personal allowance you’ll actually get if you were aged between 64 and 74 on 6th April 2008,
P = 2,995 – ((T– 21,800)/2)
And if you were aged 74 or over on 6/4/2008,
P = 3,145 – ((T – 21,800)/2)
Although your age-related personal allowance can never be negative.
So where does Gift Aid come into all this?
Well, any payments you make under Gift Aid are deemed to reduce your taxable income for the purposes of calculating any restriction of your age-related personal allowance. That means that "T" in the formulae above is made smaller. What’s more, those payments are deemed to reduce your taxable income by 100/80 times whatever they actually are.
So in hard cash terms, if you give £100 under Gift Aid, your taxable income for age-related allowance purposes is deemed to be £125 less.
And if your income is deemed to be £125 less, and you’re caught in that twilight zone where your age-related allowance is restricted, your allowance is increased by £62.50 – being half of £125 – for every £100 you give.
And if your allowance is increased by £62.50, your tax for the year is decreased by 20% of £62.50 – which is £12.50.
So if you fall in this twilight zone, for every £100 you give, you’ll get £12.50 tax back, and your maximum possible tax back could be around £600.
Even if your income is so large that you currently get no age-related allowance at all, you will still benefit if your payments under Gift Aid are large enough to bring your deemed income into or below the twilight zone.
Getting the Tax Back
But if you’re not really a numbers person and you’re just taking my word for all the maths, do at least follow three simple rules.
1. Make sure all your gifts to charities are made under Gift Aid.
2. Keep a proper record of all those gifts.
3. Tell HM Revenue and Customs about them.
If you complete any sort of Tax Return Form, you’ll find a box on it for Gift Aid payments. Please, please don’t be one of those many people who can’t be bothered to fill that box in.
And if you don’t complete a Tax Return and you think you might be due some tax back, write a letter to the HMRC – or phone them or pop in and see them – and tell them about your Gift Aid payments. They’ll happily help you sort things out, and for several past years too.
And in between times, do keep up the midweek ringing!