Getting Gift Aid right: rules, claims and HMRC audits for small charities
Gift Aid is one of the most valuable sources of income a small charity has, and one of the easiest to get wrong. HMRC paid £1.88 billion in Gift Aid to charities in 2025/26, a 10% increase on the year before. At the same time, HMRC has stepped up its compliance checks, and more claims are being rejected or reduced. This article draws some insights into “Getting Gift Aid right” and sets out the rules, the claim procedure and what HMRC looks for in an audit.
What is Gift Aid?
Gift Aid lets a charity claim an extra 25p from HMRC for every £1 a UK taxpayer donates. The idea is simple: donations should be free of tax, so the charity reclaims the basic rate tax the donor has already paid on that money. The charity makes the claim, not the donor.
Donors who pay higher or additional rate tax can also claim relief for themselves, through their self assessment tax return, on the difference between their rate and the basic rate.
When can a charity claim Gift Aid?
There are three conditions, and all three must be met:
- It must be a donation. Gift Aid is only available on genuine gifts of money.
- There must be a valid Gift Aid declaration, and the donor must have paid enough UK income tax or capital gains tax in the year to cover the Gift Aid on all their donations to all charities.
- Any benefits given in return must stay within the limits.
Claims must be made for tax years that ended within the last four years. Donations left unclaimed beyond that are lost for good, so it pays to claim regularly.
What counts as a donation?
A donation is a “payment of a sum of money”, which includes foreign currency. The following do not qualify:
- Donations in kind, such as goods given to a charity shop (these may qualify under the separate retail Gift Aid scheme if set up correctly)
- Donations that already carry tax relief, such as charity vouchers (for example CAF vouchers) and payroll giving
- Payments for goods or services, such as event entry fees, food and drink
- Raffle and lottery tickets
If someone gets something in return for their payment, it is usually a purchase, not a donation, and Gift Aid cannot be claimed on it.
Gift Aid declarations
A declaration must include, as a minimum:
- The donor’s name (a full name is strongly recommended)
- Their home address
- Confirmation that they have paid enough tax to cover the Gift Aid
HMRC publishes a model Gift Aid declaration. Following it closely reduces the risk of a declaration being challenged. The model also includes some additional recommended wording which is optional but worth including.
Verbal (oral) declarations, for example over the phone, are allowed, but there are extra requirements. The charity must keep an auditable record of the declaration and what the donor was told.
Do declarations expire?
In principle, no. An enduring declaration remains valid as long as its wording was valid when it was made. However, HMRC can struggle to trace donors from old information. Its updated guidance now recommends that charities check the details of active donors every two years, either by asking for an updated declaration or by sending a newsletter asking donors to confirm their details. Where you hold a more recent declaration, keep it.
Donor benefits and the limits
If a donor, or someone connected to them, receives a benefit because they made a donation, Gift Aid may be blocked. A benefit is any item or service provided as a result of the donation, whether it comes from the charity or from a third party. The only exception is a benefit from an unconnected third party that neither the charity nor the donor asked for.
Some benefits can be ignored, such as free admission to view property preserved for the public benefit in certain circumstances, and low-value items like newsletters. Otherwise, the value of benefits must stay within these limits:
| Donation | Maximum value of benefits |
|---|---|
| Up to £100 | 25% of the donation |
| Over £100 | £25, plus 5% of the amount over £100 |
| All donations by one donor in a tax year | Overall cap of £2,500 |
Example: a Marathon event
A charity gives a runner a place in the Marathon in return for raising a minimum level of funds. Is that a benefit for Gift Aid purposes? Yes. The value of the benefit is usually the cost to the public of a place. That value is large enough to stop Gift Aid being claimed on donations from the runner and their connected persons. Any registration fee the runner pays can be deducted from the value of the benefit, but the charity must make sure it does not claim Gift Aid on the fee itself, because the fee is a payment, not a donation.
When supporters fundraise for you
Supporters raising money on your behalf, for example through online fundraising pages, can create Gift Aid problems without realising it. Common issues include:
- Selling goods through their fundraising page
- Inadvertently running a raffle
- Paying in money they collected from other people as if it were their own donation
Give participants clear guidance and signposting on Gift Aid for their own fundraising, so that the claims you make on what they raise are sound.
How to make a claim
First, the charity must be registered with HMRC for recognition as a charity for tax purposes. Claims for qualifying donations can then be made in one of four ways:
- Using Gift Aid compatible software
- Using HMRC’s online spreadsheet through the Charities Online service
- On a paper form, which must be requested from HMRC
- Through a third party, such as an agent or fundraising platform
Record keeping and Gift Aid audits
For every donation claimed, the charity must be able to trace a clear audit trail:
- Receipt of the donation: evidence the money was received, such as a bank statement
- The donor record: who gave, when and how much
- A valid declaration linked to that donor
- Paper or computer records held in a form HMRC can inspect
These record-keeping rules still apply where a third party makes the claim on the charity’s behalf. The responsibility stays with the charity. Gaps in the audit trail can result in Gift Aid having to be repaid to HMRC, and HMRC is currently updating its guidance on Gift Aid audits.
Why HMRC rejects claims
Increased compliance activity has led to more rejected and reduced claims. HMRC’s system cannot automatically tell a charity which donors or donations caused the problem, so HMRC recommends calling the Gift Aid helpline to discuss a rejection. Common reasons include:
- Claiming on donations from companies (companies get relief through corporation tax, not Gift Aid)
- No house number or name in the address
- Addresses HMRC suspects are not residential, such as a “Unit”
- Using family names instead of individual donors’ names
- Claims made in joint names
- Payments for services disguised as donations
- Claiming for the same donation more than once
Problem areas in HMRC reviews
When HMRC reviews a charity’s Gift Aid, these are the areas it focuses on:
- Incomplete addresses
- Company donations, or donations that appear to come from companies
- Consolidated and joint donations
- CAF vouchers and other donations that already carry tax relief
- Benefits and the connected persons rules
A quick Gift Aid health check for trustees
- Are we using HMRC’s model declaration wording?
- Does every claimed donation have a full name, house number or name, and postcode?
- Have we checked active donors’ details in the last two years?
- Are event fees, raffle tickets and sales kept out of our claims?
- Do we value and record benefits given to donors, including event places?
- Can we trace each claimed donation from the bank to the donor record and declaration?
- Have we claimed for every tax year still open within the four-year window?
How Silver Throne can help
We work with charities of all sizes on their accounts, audits and independent examinations. We can review your Gift Aid processes and declarations before HMRC does, help you respond to a rejected claim, and keep you up to date with reporting changes such as the Charities SORP 2026. Community interest companies are not charities and cannot claim Gift Aid; see our guide to the CIC Regulator for how they are regulated.
Book an appointment to talk to us about your charity’s Gift Aid.
This article is general guidance based on the rules as at October 2026 and is not a substitute for specific professional advice.