The recent changes to the taxation of investment income, with the introduction of the £5,000 dividend nil rate band and £1,000 personal savings allowance, could mean that many individuals donating to charity under the Gift Aid scheme, will have insufficient taxed income to cover their Gift Aid donations. In this event, HMRC will come knocking on the door of the individual concerned in order to recover the shortfall of tax that has been passed to the charity and which has served to augment the donation to the charity.
Some charities have been criticised as being slow to react to these fundamental changes and to alert their millions of generous donors as to the potential tax implications.
Certain groups of individuals are now at risk that they will have paid insufficient tax on their own income and so should review their Gift Aid declarations and consider carefully whether this mechanism is appropriate to them now.
Low income pensioners are an obvious group who may fall foul of the rules, because if they have little or no tax liability, following the introduction of the £5,000 and £1,000 investment income tax breaks, some tax on their Gift Aid donations will be due to be paid by them - this may come as an unwelcome surprise to many!
Similarly, some expatriates with limited on-going UK tax liabilities, for example, on rental income, UK dividend income or on Government Service pensions, may have opted to give donations under the Gift Aid scheme but they, too, may not have paid sufficient UK tax to cover their Gift Aid tax.