Charities and charitable giving
To qualify for tax relief under gift aid, there are limits on the value of benefits that individuals and companies can receive as a result of making those donations. Legislation will be introduced to increase the maximum benefit that individuals and companies can receive from a charity to whom they have donated more than £10,000 through gift aid. The annual benefit limit will increase from £500 to £2,500 although it remains the case that the benefit cannot exceed more than 5% of the value of the donation.
In addition, the facility for self assessment taxpayers to request when filing their tax returns that tax repayments are made direct to charity ('SA Donate') will be withdrawn.
A further measure is to be introduced whereby if 10% or more of a deceased individual's net estate is left to charity, a reduced inheritance tax rate of 36% (rather than the standard 40% rate) will apply.
Who will be affected?
Individuals and companies making gifts to charity will be affected by the new benefit limits. SA Donate applies to self assessment taxpayers. The reduced inheritance tax rate will apply to the estate of deceased individuals.
The legislation regarding benefit limits will be introduced in the 2011 Finance Bill. Revised guidance will also be published in April 2011 to clarify a number of points on gift aid benefits.
The changes to SA Donate will apply for 2011/12 and subsequent tax years and for any repayments made on or after 6 April 2012.
The reduced inheritance tax rate applies where death occurs on or after 6 April 2012. The Government will be consulting on the specifics of this measure and a consultation document is expected before the summer.
Incentivising gifts to charity is a key theme of the Budget and the increase in benefit limits will no doubt be welcomed by taxpayers and charities alike.