Maximising the financial impact of Gift Aid

As specialist charity accountants, we often advise clients on how they can improve their finances, and one of the most important areas to consider is Gift Aid.

The Charities Finance Group (CFG) has recently released its 2024 Gift Aid survey, which highlights the need for more to be done in this area, with an estimated £560 million still being left unclaimed annually.

While 90 per cent of charities surveyed have registered to claim Gift Aid, it’s clear that there are significant challenges when it comes to actually making the claims.

Twenty per cent of charities describe the process as ‘difficult’ or ‘very difficult,’ citing the complexity and time-consuming nature of the process.

Why Gift Aid matters for your charity’s bottom line

The report reinforces how vital Gift Aid is to the charity sector, with one charity leader stating it makes a real difference in the lives of the communities they support. The good news is that there are no current plans to reduce or remove this relief.

However, charities are still losing out on significant funds due to operational barriers and a lack of awareness.

The report also suggests that many charities are unaware of the additional benefits available, such as the Gift Aid Small Donations Scheme (GASDS).

GASDS allows charities to claim on small cash donations without needing a donor’s declaration, but uptake remains low.

Raising awareness of this scheme could result in more money for your organisation, without any additional effort from donors.

Key recommendations for charities

The CFG report outlines several recommendations that are directly relevant to charity finance:

1. Streamline the registration process: Many charities find the registration process fiddly. Simplifying this could help you focus more on your charitable activities rather than administrative burdens.
2. Boost awareness among donors: Fifty per cent of charities support the idea of a government-backed public awareness campaign. Raising donor awareness is crucial – Gift Aid can increase the value of donations by 25 per cent at no extra cost to the donor.
3. Explore automation: The Future of Gift Aid project aims to automate the claims process, which would reduce the administrative burden on charities. Until that becomes a reality, utilising digital tools can still help streamline the process.
4. Invest in training: Lack of resources or understanding of the tax rules is holding many charities back. Comprehensive training on Gift Aid and related schemes like GASDS will enable your organisation to claim the full amount it is entitled to.
5. Raise the GASDS limit: The report calls for an increase in the GASDS limit from £30 to encourage more donations. Keeping an eye on legislative changes will help you stay ahead in maximising your claims.

How to close the Gift Aid gap for your charity

The survey makes it clear that more needs to be done to help charities claim Gift Aid effectively.

Whether it’s through simplifying the process, raising donor awareness, or investing in training, as your charity accountant, my goal is to ensure you’re making the most of every possible avenue to boost your income.

Maximising Gift Aid can help you continue to support the vital work you do without losing out on what’s rightfully yours.

As the cost-of-living crisis continues to impact charities across the UK, maximising every pound is more important than ever.

We encourage all organisations to regularly review their Gift Aid processes, train staff, and engage with donors about how ticking that Gift Aid box can help make a tangible difference without costing them anything extra.

If you would like any guidance on Gift Aid and its tax advantages, please contact us.