Gift Aid – Spring Statement

Our head of Charities, Jenny Simpson, reports on the impact of the planned reduction in the rate of basic rate tax on the gift aid recoverable by charities;

Most people will have welcomed the Chancellor’s announcement in the Spring Statement yesterday that the basic rate of income tax will be reduced from 20% to 19% before the end of this parliament in 2024. For the charity sector, the reduction will have a significant impact on the amount of gift aid they are able to recover on donations (estimated to be up to £250M over three years). Thankfully the detailed notes published by the Treasury include transitional measures to mitigate the initial impact on the charity sector.

The Treasury has confirmed that a future Finance Act will bring forward transitional relief provisions for charities which will maintain the basic rate of income tax relief at 20% until at least 2027. The Charity Tax Group yesterday estimated that these provisions will save the sector in excess of £250M.

The transitional provisions will give charities time to better plan for this reduction in an important income stream.

Whilst charities can currently promote the use of the gift aid scheme by telling donors that for every £1 donated they can claim an extra 25 pence in gift aid (subject to certain rules), after April 2027 the message will be that for every £1 donated an extra 23.5 pence can be claimed. It's not only potentially a significant drop in income, but it doesn’t quite have the same ring to it, does it?

This blog is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not be used as a substitute for taking professional advice in any specific situation. Wbg Services LLP (and its subsidiary Wbg (Audit) Limited) will accept no responsibility for any actions taken or not taken on the basis of this blog. If you would like further advice or would like to discuss any of the issues raised in the blog then please get in touch with your regular Wbg contact or use the contact form on our website.

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