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One month to go to before value of Gift Aid drops
Submitted by howardlake on 10 March, 2008 - 13:51.
The drop in income tax to 20p in the pound from midnight on 5 April 2008 means that the value of each Gift Aid donation after that will be reduced. According to Charities Aid Foundation, quoting HMRC figures, UK-based charities stand to lose out on roughly £90 million of Gift Aid income a year as a result.
Currently every pound given to a charity using Gift Aid is worth £1.28 for them. After 5 April this will drop to £1.25.
John Low, Chief Executive of CAF has urged people planning to give lump sums to charity to make their donation before 5 April so that charities can claim back the tax. The Institute of Fundraising has issued a similar call.
"Every pound counts", said Low, "particularly as we fear that this will be a hard year for charities anyway due to the economy slowing. If you are a UK taxpayer and are planning to make a one off donation it would be best for your charity if you give before 5 April."
Age Concern Director General Gordon Lishman said: "We stand to lose £40,000 next year alone. This is money we will have to find from somewhere else if are we are to continue all our work to fight for a better deal for the most vulnerable older people in the country. One off donations before the end of the financial year to help us make up the shortfall would be extremely welcome."
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Follow HMRC's advice
One tactic is to follow HMRC's advice as reported in Professional Fundraising's HMRC advises runners to collect sponsorship early:
"HMRC has advised charities to tell supporters running the marathon this year to collect as much sponsorship money as possible before 5 April, in order to qualify for 28p and not 25p of Gift Aid".
More importantly though, "HMRC has confirmed that donations qualify for gift aid at the point at which they are paid to a charity, or to a person acting as an agent of the charity, such as a marathon runner".
This even means that "a charity that cashed a cheque on Friday 4 April that did not clear until Monday 7 April, would qualify for the lower rate of gift aid."
So ask early and bank early!
Any creative ways of demonstrating the effect?
I wonder if any charities have come up with any particularly creative or, perhaps more importantly, effective methods of demonstrating to existing supporters how the tax change will hit the charity in terms of Gift Aid?
Is it just a case of communicating with existing donors and explaining it? What about those who were going to give for the first time and/or a large gift sometime in the next month or two? Is anyone stressing the urgency of giving sooner rather than later?
It would be good to see some examples.
Howard
Mixed tax changes
Some charities will be looking to increase their income from donations to make up the shortfall in gift aid.
Some will have a drop in tax from April (the higher earners), so perhaps can be persuaded to give more.
Though with other bills going up too, may not be much spare from some.
And some of us (the lower earners) will have a tax hike, as the 10% rate doubles to 20%. Meaning more tax paid per month so less to spend.
I daresay some charities will find some donors cutting or even cancelling payments. And like the higher earners, other bills going up too.
Ah well, the government give and the government take away.....
Though the poorer sections of society seem to have got a tougher deal this time.
Martin