Philanthropy tax: Charities enraged as Chancellor targets big donations

Rich philanthropists will be deterred from making large donations to charities following a change to tax relief rules, the Government was warned last night.

Charity leaders protested that the move ran counter to David Cameron's much-repeated commitment to a "Big Society" and called for a meeting with George Osborne to discuss the surprise move. As austerity measures bite, charities are increasingly turning to wealthy supporters to help fund projects that might previously have received taxpayers' money.

Notable recent gifts include a £10m donation by the author, JK Rowling, to set up a research clinic into multiple sclerosis in Edinburgh. Under Mr Osborne's plan, the Treasury will set a limit on the tax relief paid on large donations.

It will have the effect of cutting the amount philanthropists can claim back if they donate more than £200,000. The Treasury said it wanted to stop top-rate taxpayers claiming tax relief "excessively". But the Charities Aid Foundation warned the change could cost charities millions at a time when their income was already falling.

John Low, its chief executive, said: "Government can't have a philanthropy agenda and then introduce measures like this. These changes represent a huge cut in tax relief on major donations to charity by wealthy philanthropists whose generosity is supporting some of the most vulnerable people in society.

"Tax relief on major donations is not tax avoidance. Now, more than ever, we should be making it easy for people to donate."