In other words, she has made Gift Aid donations of £1,820 but has ‘deducted’ £364 of tax and paid the balance, £1,456 to Stewardship. The gross value of her Gift Aid donations (which is the tax-deductible amount) is £1,456 + £364 = £1,820. It is 25p because the 20% basic rate of tax is calculated on the gross donation of £1.25 (£1 + the 25p tax). Gift Aid donations are deemed to be paid after Mary has ‘deducted’ basic rate tax, which is 25p for each £1 of donation made. Net cash after pension contributions and gifts to charity She has savings interest from a cash ISA and a bank savings account, as well as some good dividend income from shares left to her by her late father. She has also authorised her employer to deduct 15% of earnings to be paid into her personal pension scheme. She faithfully pays a tithe of 10% of her income into a Stewardship Gift Aid account. Mary (whose husband works full time) earns £280 per week (£14,560 p.a.) from her part time job. If a room is let out in the taxpayer’s main home, they may be able to earn rental income of up to £7,500 without incurring any tax liability.For individuals with taxable income of up to £17,570, their tax-free savings income may be higher. Basic rate taxpayers pay no tax on savings interest of up to £1,000.The first £2,000 of dividend income is not taxed.Investment income can be tax free if earned within an Individual Savings Account (or, ISA) and The ISA savings limit for cash investments now stands at a generous £20,000.Pension contributions can act to further reduce taxable income.The tax-free allowance (also known as the ‘personal allowance’) has almost doubled between 2010//22, now standing at £12,570. The increase in the amount of taxable income that a person can receive before actually being liable to pay a penny of tax.Why is this? Some of the reasons include: HMRC tell us that around 50% of adults in the UK no longer pay any income tax at all. However, the tax landscape has changed significantly over the last few years. Most Gift Aid donors who choose to organise their giving with a Stewardship Giving Account will be giving very intentionally and will understand that they will need to have paid enough income (or capital gains) tax in each tax year (6 April to 5 April following) to equal or exceed the Gift Aid tax that we reclaim on their Gift Aided donations. It is therefore important that the members of the public are well equipped in order to be sure that they can (or cannot) make donations with Gift Aid added. HMRC are very keen to ensure that Gift Aid donors are paying enough tax to support the Gift Aid claims made by charities on their donations.
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