Charities: Reprieve for tax status of Gift Aid scheme

Charities were celebrating after the Chancellor moved to stop them losing more than £90m a year when the basic rate of income tax is reduced next month. They were alarmed by the impact of the reduction on the Gift Aid scheme, which allows them to claim back tax on donations. The effect is that every pound given to them is worth £1.28.

The basic tax rate falls from 22 per cent to 20 per cent on April 5, leading to protests that the value of charity donations would fall to £1.25 per pound.

But Alistair Darling announced that Gift Aid would continue to be paid at a "transitional" rate of 22 per cent for the next three years. He said the move would protect £300m in charity income to 2011.

John Low, chief executive of the Charities Aid Foundation, said: "It is a huge relief, as we feared charities were going to lose in excess of £90m a year when the basic rate of tax comes down next month. This will give charities a chance to adjust to the new lower rate."