Reprieve Over Gift Aid Worth £90m A Year

Britain’s 190,000 registered charities were thrown a £90m-a-year lifeline thanks to the chancellor’s last-minute decision to maintain current rates of tax relief on Gift Aid donations.

These will be maintained for at least the next three years, instead of being cut in line with the new lower basic rate of tax.

Gift Aid boosts charitable donations because the government adds back the basic rate of income tax paid by donors.

Charities had braced themselves for a loss in revenue. With a 22% rate, each £100 donated becomes £128, but with a 20% rate, £100 becomes £125.

The chancellor says charities can claim “transitional relief” for three years, allowing them to retain the 22% relief rate.

John Low, chief executive of the Charities Aid Foundation, which helps individuals donate in a tax-efficient way, said: “This is fantastic news for charities. It is a huge relief as we feared charities were going to lose in excess of £90m a year when the basic rate of tax comes down next month.

“This will give charities a chance to adjust their finances over time to the new lower rate.

“We will continue to discuss with the government how best to promote and simplify Gift Aid and other forms of tax-effective giving.”

Age Concern had expected to lose £40,000 from the change. Its director-general, Gordon Lishman, said: “We would have had to find this money from somewhere else to continue our work at its present level.”

Bill Dodwell at the accountants Deloitte said: “The chancellor’s announcement to benefit charities is really welcome. This retention of the existing repayment rate for three years should be worth up to £300m over that period.

“The change is especially welcome as it has been very hard for charities to explain easily to their donors why they lost money through the basic rate reduction.”