What is the grossed up amount under section 415 of the Income Tax Act 2007?

The grossed up amount is the net Gift Aid donation converted to its pre-tax equivalent by dividing by one minus the basic rate of income tax. This calculation allows charities to reclaim basic rate tax from HMRC. For example, at a 20% basic rate, an £800 net gift produces a grossed up amount of £1,000.

How do you calculate the grossed up amount for a Gift Aid donation?

The formula is: grossed up amount equals the net gift divided by (1 minus the basic rate). If the basic rate is 20%, divide the net donation by 0.80. For instance, an £800 donation divided by 0.80 gives a grossed up amount of £1,000, meaning the charity can reclaim £200 from HMRC.

Which basic rate of income tax applies when grossing up a Gift Aid donation?

The basic rate used is the one in force for the tax year in which the gift is made. If the basic rate changes between tax years, the grossed up amount will differ accordingly, even if the donor makes the same net donation. This ensures the correct amount of tax is reclaimed by the charity from HMRC.

Why is the grossed up amount important for higher rate taxpayers making Gift Aid donations?

For higher rate and additional rate taxpayers, the grossed up amount determines the further tax relief they can claim through their self-assessment return. The charity reclaims basic rate tax using the grossed up figure, while the donor claims the difference between the higher or additional rate and the basic rate on that same grossed up amount.

Income Tax Act 2007 section 415

Meaning of "grossed up amount"

Section 415 defines what is meant by the "grossed up amount" of a charitable gift for the purposes of Gift Aid.

The grossed up amount is the net gift amount increased to reflect the basic rate of income tax.
The basic rate used is the one in force for the tax year in which the gift is made.
Grossing up converts the donor's net payment into the pre-tax equivalent that the charity can reclaim.
For example, at a 20% basic rate, a £80 net gift has a grossed up amount of £100.

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