Money donated to you through a personal fundraising page, for example to pay for medical treatment, a funeral or recovery after a fire, is normally a gift and is not taxable income. It becomes taxable when it is really payment for something: rewards or products you supply to backers, extra payment for your work as a creator or performer, or money raised to keep a business trading. The test is the character of the money in your hands, not what the page calls it.
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Why are donations on a personal fundraising page usually tax free?
Income tax is charged on income from a source, such as employment, a trade, property or savings. A gift has no source of that kind. HMRC’s Business Income Manual at BIM41810 summarises the case law: voluntary payments or gifts are not taxable unless they can be attached to a pre existing source such as a vocation (Beynon v Thorpe). The sweep up charge on miscellaneous income does not catch them either; BIM100101 says those provisions do not tax voluntary receipts such as gifts and gratuities.
So where friends, family and strangers give money because they want to help you personally, and get nothing back, the money is a gift. You do not report it on a tax return. If the money is later saved and earns interest, the interest is taxable in the normal way, and our guide to money received as a gift or inheritance covers what happens next.
When does crowdfunding become trading income?
BIM41810 says it is the character of the payment in the recipient’s hands that decides whether it is taxable, although the payer’s purpose can be evidence of that character. It then gives signposts that point towards a taxable trading receipt:
- a voluntary payment designed in some way to augment the consideration for goods or services, past, present or future, is taxable (Severne v Dadswell; CIR v Falkirk Ice Rink);
- a payment made so that the money can be used in the recipient’s business, to supplement its receipts, enable it to carry on or preserve its stability and solvency, is a taxable trading receipt;
- a payment that rewards services not otherwise adequately paid for, or makes good a loss of profit, is a taxable trading receipt;
- there does not need to be a trading relationship between payer and recipient for a payment to be a trading receipt.
In practice this means three common types of campaign are likely to be taxable:
- Reward based campaigns. If backers who pay a set amount receive the album, book, product or experience, they are buying it in advance. Those receipts are sales.
- Support for a business. A café, shop or self employed person who raises money to stay open or replace lost income is raising money for the business, which BIM41810 treats as a trading receipt.
- Ongoing support for creative work. Regular payments from fans or followers to a musician, writer, artist or content creator are attached to their vocation and add to what they earn from it.
Whether there is a trade at all is decided using the badges of trade, which HMRC summarises at BIM20205. A one off campaign for personal hardship will not show them; a series of campaigns selling products to the public usually will.
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Can a page mix gifts and taxable income?
Yes. A campaign that offers rewards at some levels and simply accepts donations at others can contain both. A backer who pays £10 and gets a thank you is close to a donor; a backer who pays £40 for a signed copy is a customer. Keep a record of which payments carried a reward so that only the taxable element is included in your accounts. Where a reward is clearly worth far less than the amount given, explain how you split the figure, because HMRC will look at the substance.
Does the £1,000 trading allowance help?
It can, for small campaigns. GOV.UK explains that the trading allowance is a tax exemption of up to £1,000 a year for individuals with trading income, including casual services. If your gross trading income is £1,000 or less you may not need to tell HMRC. Above that you must register for Self Assessment, and you can then deduct either the £1,000 allowance or your actual expenses. Gross income means the total before costs, so a campaign that raises £3,000 to fund a product costing £2,500 to make still exceeds the limit. See our page on the trading allowance.
Does VAT apply?
Only to supplies made by a business. HMRC’s VAT manual at VATSC06110 says a monetary donation that is freely given is not consideration for any supply and is outside the scope of VAT. It must be unconditional, and the manual asks whether the donor receives anything in return and whether there are conditions beyond a mention in account statements. Rewards given to backers can turn their payments into consideration for a supply. A business only has to register once taxable turnover goes over the VAT threshold, which GOV.UK gives as £90,000 over the last 12 months; see VAT registration threshold.
What about money from an employer or colleagues?
A collection among colleagues for someone who is ill or bereaved is a personal gift. HMRC’s Employment Income Manual at EIM01460 says a gift is not earnings if it is made on personal grounds or as a mark of personal esteem. By contrast EIM01450 says a gift or voluntary payment counts as earnings when it arises from the employment. A fundraising page set up by an employer to reward staff for their work, rather than to help with a personal crisis, would need to be looked at on that basis.
Do the people who donate face any tax?
Usually not. A donation to an individual is a gift for Inheritance Tax. GOV.UK explains that gifts of up to £250 per person per tax year are covered by the small gift allowance, that £3,000 of gifts a year are covered by the annual exemption, and that no tax is due on other gifts if the donor lives for 7 years. Very large donations by someone who dies within 7 years are the only real risk, and the rules are in annual exemption and small gifts.
Donors cannot get Gift Aid on money given to an individual. GOV.UK says Gift Aid is claimed by a charity or community amateur sports club recognised for tax purposes, so it is only available where the page is collecting for such a body.
How might different pages be treated?
Illustration only.
| Page | What backers get | Likely treatment |
|---|---|---|
| Sam raises £8,000 for private physiotherapy after an accident | Nothing | Gift, not taxable |
| Priya raises £6,000 to record an album; backers of £15 or more get a copy | The album | Sales of a trade; taxable, with expenses deductible |
| Jo raises £4,000 to keep her café open after a flood | Nothing, but the money supports the business | Trading receipt under the BIM41810 signposts |
| A streamer receives £200 a month from fans on a support platform | Content and recognition | Attached to the vocation; taxable as part of the trade |
What mistakes come up most often?
- Assuming the word donation decides it. HMRC looks at what the money is really for.
- Ignoring the reward levels. Pre selling a product is trading, even on a site built for donations.
- Treating business rescue money as a gift. Money to keep a business going is normally a trading receipt.
- Not keeping records. Save the campaign page, the reward tiers and the payout statements, so you can show which receipts were gifts.
- Forgetting the trading allowance works on gross income. Costs of fulfilling rewards do not reduce the £1,000 test.
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Related Accountapedia entries
- VAT on crowdfunding
- Is equity release money taxable
- Is a retirement gift from your employer taxable
- Client money rules for accountants
- The money purchase annual allowance
Sources
- GOV.UK: Manual page BIM41810
- GOV.UK: Manual page BIM100101
- GOV.UK: Manual page BIM20205
- GOV.UK: Tax free allowances on property and trading income
- GOV.UK: Manual page VATSC06110
- GOV.UK: Register for vat
- GOV.UK: Manual page EIM01460
- GOV.UK: Manual page EIM01450
- GOV.UK: Gifts
- GOV.UK: Claim gift aid
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.