Question about charity donations as someone self-employed with variable income.

[CountessJosephine]

You know when you donate online to a 'good cause' - ie JustGiving- and it asks if you pay tax? Well, what do you do if you don't know if you will pay tax next year? My income is borderline taxable but I do pay NI. I don't know if next tax year when the PA increases whether I will pay tax or not. Does NI count as tax?
The other thing is, when I do my self assessment is asks whether I've given to charity. I always leave this blank if I'm not sure if I' d be owing tax or not. But also- don't they ask who you have donated to, so do you need to keep a record?

[VeganCow]

I think you treat it as an 'out' expense, so if you earn enough to pay tax, they will take your charity donations in to account, if you dont earn enough to pay tax, then obviously you wont benefit from it. I would also tick the tax box when donating, so they can get a little more too.

[gottogetdressed]

You are referring to Gift Aid, which is a government scheme which allows the charity to reclaim your income tax on your donation (actually currently 25p for every £1 as it's actually topped up by the Government at present). It is referring to income tax - not NI. If you don't pay any income tax, the charity cannot reclaim it - it may be safer to say 'no' if you don't, as if you do one year, and then not the next, it would be up to you (not the charity) to tell them that they can't claim gift aid on your donations to them any more.

The reason it is on you self assessment form is that if you pay income tax at a Higher rate then you can claim back the difference between what the charity can claim (25p) and your higher rate of tax (40p) - so you get 15p per £1 donated to charity back from HMRC. If you aren't paying the higher rate then it won't matter.

More info here www.gov.uk/donating-to-charity/gift-aid

[gottogetdressed]

Sorry - maths slightly out on the higher rate thing - you can actually claim back 20p in the £1 if you are a higher rate tax payer as they don't take into account the 5% top up (40% higher rate - 20% basic rate = 20% reclaim).

[Badbadbunny]

It's not only about higher rate tax relief. The other reason you HAVE TO declare gift aid payments on your SA tax return is that if it turns out you aren't a taxpayer, then the SA return will require YOU to repay the tax relief that the charity claimed. If you're in any doubt as to whether you'll be a taxpayer, you shouldn't tick the box on the gift aid donation form, then you won't risk having to repay the tax relief! (or of course you may be happy to repay the tax relief as it's effectively a bigger donation to the charity).