Gift Aid: transitional relief - some good news

Please note that the details on this page reflect the contents of the 2008 Budget and its associated paperwork. Some points may therefore have been superseded by subsequent events. 

Concerns had been raised by charities over the reduction in their reclaimable tax credits due to the reduction in the rate of basic tax rate from 22% to 20%. In the Budget 2008 Mr Darling announced that a transitional tax relief will be introduced in order that UK charities and community amateur sports clubs can continue to reclaim tax on gift aid donations for 2008/09 to 2010/11 at 2007/08 rates .This means that despite the drop in the basic rate of income tax from 22% to 20% the charities can continue to reclaim 22% of the gross equivalent of the donation.

The transitional provision is welcome and will be of particular benefit where gift aid donations are made by basic rate taxpayers as the 22% reclaimable is preserved without an impact on the donor. In the case of higher rate taxpayers the overall effect may be beneficial as it appears that the higher rate tax relief claimed by the donor will be increased to 20% (being the difference between the unchanged 40% higher rate and the new 20% basic rate).

It is worth noting that a similar transitional arrangement has not been suggested for payments to pension plans.

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