How the Budget will impact on ... charity

Mar 13 2008 by Cheryl Mullin, Liverpool Daily Post

CHARITIES will not lose out when the new lower rate of income tax is introduced next month, Chancellor Alistair Darling pledged yesterday.

The voluntary sector had faced losing over £90m a year in Gift Aid after the basic rate of income tax falls from 22% to 20% on April 5.

But the Budget included provision for Gift Aid to be paid at a transitional rate of 22% for three years, meaning the level of benefit will remain the same.

Gift Aid allows charities to reclaim the tax paid on one-off donations so that every pound donated is actually worth £1.28.

But the value of donations would have fallen to £1.25 per pound from the start of the new tax year.

Mr Darling said introducing the transitional rate meant charities would receive extra Gift Aid worth about £300m between 2008 and 2011.

The Charities Aid Foundation said the Chancellor's announcement was fantastic news'' for charities.

John Low, the Foundations chief executive, said: It is a huge relief as we feared charities were going to lose in excess of £90m per year when the basic rate of tax comes down next month. This will give charities a chance to adjust to the new lower rate.

He went on: We will continue to discuss with Government how best to promote and simplify Gift Aid and other forms of tax- effective giving.