Changes have been made to tax rules relating to Gift Aid for donors to charity paying Scottish rates of income tax, although charities themselves will not notice any immediate change.

The Scottish rate of income tax was introduced with effect from 6 April 2016. For fiscal years 2016/17 and 2017/18, the Scottish rates were set at the same levels as in the rest of the United Kingdom, but marked changes took effect from fiscal year 2018/19.

The new structure in Scotland consists of a starter rate (19%), basic rate (20%), intermediate rate (21%), higher rate (41%) and top rate (46%) – these rates are in addition to those which apply to unearned income, which remain at UK-wide levels for Scottish purposes.

The level of tax relief granted under the Gift Aid scheme remains reserved to the Westminster Parliament. As a result, even although the income tax rates now vary between Scotland and the rest of the UK, charities will not notice an immediate difference in terms of their own Gift Aid reclaims: charities will still be able to reclaim 25p for every £1 donated by a Scottish tax-paying donor.

However, donors themselves may notice a slight difference in their tax calculations, particularly where they make their own Gift Aid-related reclaims under self-assessment. A Scottish donor making Gift Aid donations must ensure that they have paid sufficient tax to cover sums reclaimed by charities if the donor pays tax at the starter or basic rates. They may also be able to reclaim the difference between the tax rate actually paid and the UK basic rate – this applies to Scottish taxpayers who pay the intermediate, higher or top rates of income tax.

Scottish donors to charity need to be aware of these changes to the tax rules and Scottish charities with worked examples of Gift Aid calculations in their fundraising materials may need to consider whether their materials have now become out of date following the detailed changes to the rules.