Charity donations & taxation

[TheHoof]

I am aware that it is possible claim tax relief on donations to registered charities in the UK through the Self Assessment process however; what isn't clear is whether a donation a) reduces taxable income or b) simply refunds the income tax previously paid on the donation. Can anyone confirm which is the case?

Under a) one could envisage a situation whereby a donation could drop taxable income from one bracket to another i.e from 40% to basic rate / 45% to 40%, which next tax year would impact the personal savings allowance etc.

[TheHoof]

I think I follow but here's a clarification of the question by means of a hypothetical scenario:

HMRC have said from 2016 "To be eligible for the £500 tax-free Personal Savings Allowance your taxable income needs to be between £42,701 and £150,000 a year."

Mr. J Bloggs is a PAYE earner, earns £151,000 of taxable income in 2016/17, ergo their personal savings allowance is £0. If said earner were to donate £1001 to a charity, would their personal savings allowance be

a) £500 based on their taxable income being £1499,999
b) £0 as their taxable income remains £151,000
c) None of the above because the tax regime in the UK is complete sodding mess.

[TheHoof]

Thanks for the help!

[TheHoof]

Spoke to HMRC on this question and the answer was a resounding "we don't know". Seems the detail of the personal savings allowance hasn't been fully documented yet. Further guidance is expected before the start of next tax year.