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Tax

Charities set to lose over £90m

Written by Adrie van der Luijt

Wednesday, 05 March 2008

Charities are bracing themselves for a major drop in funding when income tax is lowered to twenty pence in the pound one month from midnight on 5 April 2008.

Based on current levels of giving UK based charities stand to lose out on roughly £90million of Gift Aid a year which would be enough to vaccinate 18 million children from childhood diseases, pay for 3,205 elderly people to live in a care home for one year, or buy 1.3 million hearing aids.

John Low, chief executive of the Charities Aid Foundation has urged people planning to give lump sums to charity to make their donation before 5 April so that charities can claim back the tax.

Low said that it was good news for individuals that income tax was dropping but there would be millions and millions less for charities to claim back.

“Every pound counts particularly as we fear that this will be a hard year for charities anyway due to the economy slowing. If you are a UK taxpayer and are planning to make a one off donation it would be best for your charity if you give before 5 April,” he added.

There are over 190,000 registered charities in the UK of which Age Concern is one. Age Concern director general Gordon Lishman said his organisation stands to lose £40,000 next year alone.

“This is money we will have to find from somewhere else if are we are to continue our work to fight for a better deal for the most vulnerable older people in the country. One off donations before the end of the financial year to help us make up the shortfall would be extremely welcome,” he added.

The Government introduced Gift Aid for individuals in 1990 to enable charities to claim back the income tax paid on one-off donations.

Currently every pound given to a charity using Gift Aid is worth £1.28 for them. After 5 April this will drop to £1.25.

Higher rate taxpayers can claim 18 per cent personal tax relief on the gross value of their donation. This currently works out at 23 pence for every £1 you donate. After 5 April this will change to 25 pence per pound donated.

Making a donation requires a simple declaration for the charity to be completed. This can be done in writing, over the phone or online.

The declaration can apply to all past donations you have made in the past six years and to all future donations you make.

Anyone who has paid enough UK income tax or capital gains tax in the current financial year to cover the amount reclaimed by the charity can use Gift Aid.

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