Carry back charitable donations

If you are a higher rate or additional rate taxpayer you have the option to carry back your charitable donations to the previous tax year. A request to carry back the donation must be made before or at the same time as your previous year’s self-assessment return is filed.

This means that if you made a gift to charity in the current 2024-25 tax year that ends on 5 April 2025, you can accelerate repayment of any tax associated with your charitable giving. This can be a useful strategy to maximise tax relief. For example, if you would not pay higher rate tax in the current tax year but did in the previous tax year. The formal carry-back claim should be undertaken as part of the self-assessment tax return for 2023-24, which must be submitted by 31 January 2025.

You can only claim if your donations qualify for gift aid. This means that your donations from both tax years together must not be more than four times what you paid in tax in the previous year.

If you do not complete a tax return you need to use a P810 form to make a claim.

If you are a higher rate or additional rate taxpayer, you are eligible to claim additional tax relief on the difference between the basic rate and your highest rate of tax.

For example:

If you donated £5,000 to charity, the total value of the donation to the charity is £6,250. You can claim:

  • £1,250 if you pay tax at the higher rate of 40% (£6,250 × 20%),
  • £1,562.50 if you pay tax at the additional rate of 45% (£6,250 × 25%).

The Gift Aid scheme is available to all UK taxpayers. The charity or Community Amateur Sports Clubs (CASC) concerned can take your donation and, providing all the qualifying conditions are met, reclaim the basic rate tax. This increases the value of your donation by 25p for every pound donated.

If you are a higher rate or additional rate taxpayer, you are eligible to claim additional tax relief on the difference between the basic rate and your highest rate of tax.

For example:

If you donated £5,000 to charity, the total value of the donation to the charity is £6,250. You can claim back additional tax of:

  • £1,250 if you pay tax at the higher rate of 40% (£6,250 × 20%),
  • £1,562.50 if you pay tax at the additional rate of 45% (£6,250 × 25%).

If you are a higher rate or additional rate taxpayer you also have the option to carry back your charitable donations made in the current tax year, to the previous tax year.

A request to carry back the donation must be made before or at the same time as your previous year’s Self-Assessment return is completed.

This means that if you made a gift to charity in the current 2021-22 tax year that ends on 5 April 2022, you can accelerate repayment of any tax associated with your charitable giving. This can be a useful strategy to maximise tax relief if you will not pay higher rate tax in the current tax year but did in the previous tax year. This should be done as part of the Self-Assessment tax return for 2020-21 which must be submitted by 31 January 2022.

You can only claim if your donations qualify for gift aid. This means that your donations for both tax years together must not be more than 4 times what you paid in tax in the previous year. If you do not complete a tax return you need to use a P810 form to make a claim.

If you pay Income Tax at the basic rate no additional relief is due on your charitable donations. However, if you are a higher rate or additional rate taxpayer then you can claim tax relief on the difference between the basic rate and your highest rate of tax. This relief is given by increasing your basic rate and higher rate band by the grossed-up amount of your gifts.

If you are a higher rate or additional rate taxpayer you have the option to carry back your charitable donations to the previous tax year. A request to carry back the donation must be made before or at the same time as your previous year’s self-assessment return is completed.

This means that if you made a gift to charity in the current 2020-21 tax year that ends on 5 April 2021, you can accelerate repayment of any tax associated with your charitable giving. This can be a useful strategy to maximise tax relief if you will not pay higher rate tax in the current tax year but did in the previous tax year.

You can only claim if your donations qualify for gift aid. This means that your donations from both tax years together must not be more than 4 times what you paid in tax in the previous year. If you do not complete a tax return you can submit a claim using HMRC’s P810 form.

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Case Studies

The Tax Man

Minimise the stress of an investigation and make use of our extensive experience in securing best outcome for our clients

Business Valuation in Distress

Take advantage of our impartial and rigorous due diligence procedures

FD in The Cupboard

Our innovative ideas are here to improve your business performance and secure appropriate and cost effective funding

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The Tax Man

The Tax Man

A new client was introduced to us via a recommendation with whom we arranged to meet on a regular basis in order to determine a number of changes that we felt were needed to their business structure. The client was at the time operating as a husband and wife partnership. The business was flourishing and had a number of large contracts with big organisations.

At the start of the process they were still heavily immersed in their day to day operations so we can get a full flavour for their ambitions, aspirations and growth plans. We quickly recognised there were sufficient tax savings which can be achieved by changing the structure from a partnership to a corporate entity. We carried out a business valuation and disposed of the goodwill from the old to the new business. Unfortunately, as often is the case with efficient tax planning, HMRC got involved and disputed our valuation.

An HMRC investigation can be a very stressful time for any client, even for those best prepared. However, our client had minimal input in the HMRC communication as we dealt with this professionally behind the scene. As an added benefit, our client could rest on the security that all work was covered by insurance and therefore all costs and time in dealing with this enquiry were covered by the fee protection policy we had put in place.

The initial approach taken by HMRC was very aggressive and they tried to present an argument that there was no goodwill in the business. We challenged HMRC’s view that the goodwill was worthless. After lengthy correspondence and numerous telephone calls, HMRC agreed 100% with our original valuation, which preserved our original tax saving plan for the client. Tax savings on this case where in the region of £75K at the outset, with ongoing savings of £6,000 per annum. We are pleased to add another happy client to our portfolio.

Business Valuation in Distress

Business Valuation in Distress

Selling a business is never an easy process, but when disputes arise, the need for a reliable third party due diligence process is even greater.

Tearle & Carver have extensive understanding of the requirements for remaining objective when managing a potentially difficult company buyout. In one such case, we were approached by the courts to act as independent accountant for an acrimonious business sale in which one partner was exiting the business and selling shares to the other. Given the circumstances, both sides had totally polar views of what their business was worth.

After arranging an initial meeting with the company, we were thorough in ensuring we completed due diligence, validating the figures in the accounting records, carrying out adjustments where appropriate, and drafting a set of reliable management figures within the framework required by the court.

A draft version of the report detailing our findings and conclusions was submitted to both parties, giving them the opportunity to voice any queries or concerns and ensure all relevant factors had been taken into account.

Through this process, we were able to submit a final report to the courts that was both binding and acceptable to both parties, effectively resolving what could otherwise have been a time consuming and costly process for all sides.

FD in The Cupboard

FD in The Cupboard

For smaller companies, it is often not possible or cost effective to pay for a full-time Financial Director.
Many of our clients therefore make use of Tearle & Carver’s extensive expertise to provide the services of an FD as and when required.

In this case, we were approached by the management team of an organisation looking to acquire the existing business via an MBO (Management buy out). Their business plan had proved ineffective for securing funding, and what they needed was financial expertise from someone with a developed understanding of the company’s internal workings.

Tearle & Carver helped deliver the solution our clients were looking through utilising our bank contacts in order to make the MBO viable, while also building a robust business plan and preparing our client for the rigorous vetting process. To help with cash flow issues, we introduced factoring which led to improved cash flow management.

We advised on the appropriate business valuation and structure, and continued to prepare monthly accounts to track profgress once the management were fully in command of all the information they needed to move their business forward.

In order to best assist these clients through the crucial first year of ownership, we attended board meetings on a regular basis, a service that we continue to provide to date.

With our continually developing understanding of their business, this client is able to remain confident that Tearle & Carver can provide any financial support they may need, now and in the future.