The government has announced a number of reforms to charitable giving including plans to reduce inheritance tax (IHT) for estates donating to charity.
In a bid to encourage giving by the wealthiest, the Gift Aid scheme, which enables charities to claim back tax relief on donations by UK taxpayers, will be simplified. The Gift Aid benefit limit, which enables charities to give modest benefits to a donor as a token of appreciation for a donation, will also increase from £500 to £2,500 from April 2011.
IHT will be reduced by 10 per cent for those estates leaving 10 per cent or more to charity, effectively reducing it from 40 per cent to 36 per cent. According to the government the relief is designed so that the benefit of the tax saving is reflected in the bequests received by charities and not in payments to other beneficiaries.
John Kelly, chartered accountant partner at Square One Financial Planning said: "I think the Chancellor sees charities filling the hole left in government spending plans. By bringing in this new allowance, the chancellor hopes that charities will gain by more than £300m."
