Cap could deter some philanthropists after 25 years of payroll giving

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Charities claim that Government plans to cap tax relief on charitable donations may deter major donors.

Fri, 27 Apr 2012

Charities claim that Government plans to cap tax relief on charitable donations may deter major donors.

The Government Payroll giving scheme was set up in 1987. The scheme allows PAYE employees to donate from their gross pay. The previous system particularly benefited those in higher tax brackets who may even find themselves in a position to claim some tax back from HMRC.

The scheme raises over £115 million for charities per annum and in 2010-2011 was responsible for 42% of the UK’s charitable donations. This steadily increases year on year and is one of those most loyal methods of giving. The vast majority of the money raised comes from the highest earners.

In the March budget, George Osborne announced a cap on tax relief for those seeking to claim more than £50,000, to just 25% of their income. This has increased pressure on individuals to give by 6th April in order to receive the maximum possible tax relief.

A survey by Charities Aid Foundation revealed that 83% of donors felt the change would reduce donations. Following the budget a number of charities came together to launch the ‘Give It Back George’ campaign and met Exchequer Secretary David Gauke on 2nd April to discuss their concerns.