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How to give to charity and turn your £400 energy rebate into £500

·2-min read
Rishi with coins
Rishi with coins

Workers donating their £400 energy handout to charity, as suggested by Chancellor Rishi Sunak, can earn themselves £100 in tax relief.

Mr Sunak has announced that every household will receive an automatic £400 discount to their energy bill in October, to help alleviate the cost of living. He has now told wealthy people who do not need financial assistance from the Government to donate the handout to charity.

Doing so will benefit good causes and also put £100 into the pockets of workers, who can claim tax relief against charitable donations. Higher and additional-rate taxpayers can claim the difference between their marginal rate they pay and the basic rate on donations.

This means higher-rate payers can claim tax relief on donations made to charity, meaning £100 on a £400 donation. This works because if the donation is made using Gift Aid then the charity can claim an extra 25p for every £1 donated from the taxman. This means that the £400 donation would be worth £500 to the charity. A higher rate taxpayer can then claim 20pc back of this total as tax relief, meaning on the £400 donation they would receive £100 tax relief.

Mr Sunak announced the support this week as Britain struggles with the greatest cost-of-living crisis in a generation. Energy bills are expected to rise by around £830 in October, to £2,800 a year, and remain high in 2023.

The elderly, disabled, and low-income households receiving means-tested benefits will also receive targeted support and pensioners will see their winter fuel payment boosted later this year.

The Chancellor indicated that he would donate his own grant to charity and suggested other wealthy households should do the same. He told Sky News: “You can give that money to charity if you don’t need it.”

Mr Sunak had originally announced a £200 discount on energy bills which households would need to pay back over the next five years. Under the new grant no household will have to pay back the money and the rebate has been doubled to £400.

Bill payers will not need to contact their energy company as the grant will be automatically applied to every household bill in October.

Earlier this week, the energy regulator, Ofgem, announced Britain's energy price cap would rise to around £2,800 in October, meaning households will pay 42pc, or around £830, more than they do now.

This will pile more pressure onto struggling households already facing higher prices after inflation hit 9pc last month.

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