Charities set to lose over £90m a year when Income Tax drops

Charities are bracing themselves for a major drop in funding when income tax is lowered to twenty pence in the pound next month (6th 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 1.3million hearing aids.

John Low, Chief Executive of the Charities Aid Foundation has today urged people planning to give lump sums to charity to make their donation before 6th April so that charities can claim back the tax.

John Low said; “It is good news for individuals that income tax is dropping but there will 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 6th April.”

There are over 190,000 registered charities in the UK of which Age Concern is one. Age Concern Director General, Gordon Lishman said: “We stand to lose £40,000 next year alone. This is money we will have to find from somewhere else if are we are to continue all 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.”

How Does Gift Aid Work?

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 5th April this will drop to £1.25.

If you are a higher rate taxpayer you can claim 18% personal tax relief on the gross value of your donation. This currently works out at 23 pence for every £1 you donate. After 5th April this will change to 25 pence per pound donated.

When you make a donation you need to complete a simple declaration for the charity. 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.

Who can use Gift Aid?

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.