Feeling Undertaxed? Help Is On The Way!

[geni]

If you want to give your money away it might be better to find some charity to give it to.

It's a bit hard to find a legal way to fund a charity to invade random countries or develop nuclear weapons.

 

[Fiona]

This is kind of correct, kind of incorrect.

If a basic rate taxpayer wants a charity to benefit by 100, they can give them 78 under gift aid, which enables the charity to reclaim 22 from the government. This is economically the same (ignoring admin costs) to giving a basic rate taxpayer relief on a donation of £100 @ 22%. Effectively relief is given "at source" by the payment from the government directly to the charity. Doing it this way avoids the need for basic rate taxpayers to make a claim to receive relief (a large number of UK employees, particularly basic rate taxpayers do not need to complete tax returns as all tax is collected through the PAYE system.) This is because the UK has very, very few deductions available from employment income (pension contributions being the main one).

A higher rate taxpayer who wants a charity to benefit by 100 does the same, but can then claim relief from higher rate tax on the income, meaning there tax bill is reduced by £18, so the net cost to them is £60. This is the same as giving tax relief on the whole donation at 40%. Part of the relief is "at source" as for basic rate payers, part directly on a claim in the tax return.

Yes and no. The taxpayer pays out of taxed income but unless he is higher rate he does not get any money back. The charity gets the tax he has paid on the money: he does not. I think in the US the taxpayer gets the relief, unless I have misunderstood?

 

[thaiboxerken]

I might actually give more money to the government, if I got to decide how it would be spent. Right now, I'd rather not pay any more into the war than I have to, and I only do that because of the law.

 

[WildCat]

I might actually give more money to the government, if I got to decide how it would be spent. Right now, I'd rather not pay any more into the war than I have to, and I only do that because of the law.

A dollar is a dollar is a dollar, you are under the delusion that earmarking your extra contribution to feeding hungry children doesn't free up money for guns and bombs.

You're probably also shocked that state lotteries, with the proceeds going 100% to education, didn't actually increase education funding but only made more money available for other things.

Sucker.

 

[dirtywick]

You'll probably end up paying for the extra ink needed to add that line to the millions of tax forms they print.

 

[thaiboxerken]

A dollar is a dollar is a dollar, you are under the delusion that earmarking your extra contribution to feeding hungry children doesn't free up money for guns and bombs.

Wrong. I know that I have no real say in how any of my tax dollars are spent. Thus, I won't volunteer any more than is legal.

 

[BPSCG]

Thus, I won't volunteer any more than is legal.

There is no legal limit on how much you can pay. So go ahead, pay all you owe, and then some. The IRS goons won't come after you.

 

[thaiboxerken]

I meant legally required.

 

[Jaggy Bunnet]

Yes and no. The taxpayer pays out of taxed income but unless he is higher rate he does not get any money back. The charity gets the tax he has paid on the money: he does not. I think in the US the taxpayer gets the relief, unless I have misunderstood?

That is why I said it is kind of correct, kind of incorrect. You are right in that the charity gets the money back, not the individual (assuming a basic rate payer) whereas in the US (as I understand it) the individual can claim a deduction against taxable income for the donations he makes, however the overall outcome is the same.

For example, US person wants charity to have 100. He gives them 100 and claims a deduction in his tax return reducing his tax by 22 (lets assume both countries have the same tax rate for ease of comparison). Result is that he has 78 less overall (100 donation minus 22 reduction in his tax liability) and the charity has 100.

UK person wants charity to have 100. He gives them 78 and they claim 22 from the government. He does not have to make any entry in his tax return. Result is that he has 78 less and the charity has 100.

In both cases the difference between the net impact on the individual and the total received by the charity is borne by the government. The difference is more in how this is achieved than in what is achieved.