Gift Aid Reprieve

There was good news for charities in the 2008 Budget Report.

Under the Gift Aid scheme, charities are able to claim the basic rate income tax that a donor has paid on a donation. When the basic rate income tax was 22%, a charity could claim an additional 28p for each pound donated under the scheme (£1.28 being the ‘grossed up’ amount from which a donor of £1 would be deemed to pay 22% tax to leave him with £1 net).

In the 2007 Budget it was announced that, from April 6 2008, basic rate income tax would be reduced to 20%. This was a cause of concern to charities, as the Gift Aid that a charity could reclaim would be reduced to 25p for each pound donated.

However, it has now been announced by the Government that from 2008/09 to 2010/11, charities will be able to claim a 2% transitional relief for gift aid donations. The effect will be to maintain the payment made to them at 22% of the gross gift, despite the reduction in basic rate tax to 20%.

Estimates put the value of this concession in the region of £100 million a year to the charity sector. Naturally, this is very welcome news and should now allow charities time to factor the changes into their long term plans.

For more information regarding this or any other Charity matters please contact Chris Knight at chrisknight@hewitsons.com