Margaret Hughes makes a donation of £100 through a community foundation. The foundation grosses up the value of the gift, and multiplies the donation amount by 28% to calculate the tax it can reclaim, as follows:
| £ 100 (donation) | x | 22 (Basic rate of income tax) | = | £28 tax relief to charity |
| 78 (100 minus the basic rate) |
If Margaret is a higher rate taxpayer, she will want to calculate the tax relief she can claim. She is eligible to claim the difference between the higher rate of tax (40%) she has paid, and basic rate tax (22%) reclaimed by the community foundation (40% - 22% = 18%). Therefore, Margaret simply works out the gross value of her gift to the foundation (£100 + £28 = £128) and calculates 18% of that figure to calculate the tax relief she is entitled to reclaim: £128 (gross donation) x 18% = £23 tax relief to donor
So, to put it simply, Margaret reclaims 23% of the cost of her initial £100 donation.