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The Budget - good news for charities!

When the government announced last year that the basic rate of Income Tax would fall from 22% to 20% there was a mixed reaction from those working for charities. Tax cuts mean more take-home pay, but it also meant that income from Gift Aid claims would fall from 28 pence to 25 pence for every pound donated under the scheme.

It looked like representations to the government from the Charity Sector were falling on deaf ears, but on Wednesday 12th March the Chancellor announced in his budget that charities are to be reimbursed for Gift Aid losses incurred when the basic rate of income tax drops in April 2008.

How will this work in practice?

From 6th April 2008 charities will claim their Gift Aid rebate using the new rate (i.e. 25p in the pound), but the HMRC will top it up to the old rate of 28p in the pound. The government has pledged to do this until April 2011. However, the top up payments cannot be made until after the changes have received Royal Assent in late July 2008.

Implications for payroll giving

As we understand it, payroll giving will be unaffected by these changes which means that no top up is available for donations made under this scheme.

Additional information

Further details are available from the Stewardship website. They have also prepared papers on how the 2008 budget affects charities.