U-turn over charity tax relief limit

Controversial plans to limit tax relief on charitable donations unveiled in this year’s Budget have been dropped in a surprise move by The Treasury. 

The introduction of an annual cap set at 25 per cent of the doner’s income or £50,000, whichever is greater, was due to come into effect in 2013, much to the protest of numerous charities. 

The shock decision to reverse the proposed cap on charitable donations has been welcomed by many.

“This is fantastic news for charities who need to be rewarded rather than hindered during a recession.” Comments Owen Kyffin, Tax Partner, Whitley Stimpson. “Charities are already finding it tough in the current economic climate so any introduction of a cap on donations would have been a complete disaster for fund raising, causing a significant decline in support for many good causes.”

Numerous UK charities depend upon major gifts from philanthropists who are given strong encouragement to give through the benefits of income tax relieve, Gift Aid, loss relief and qualifying loan interest relief. 

Higher-rate taxpayers giving to a charity can reclaim more than half the income tax they have paid on the donation, irrespective of the sums involved.

The rationale behind the Budget announcement had been that people could donate enough money to charity or offset a business loss against their earnings to effectively bring their tax bill down to zero.

The consultation on how a cap would be imposed on other tax relief measures will continue this summer.