Budget 2007 effect on Gift Aid

Budget 2007 was a little while ago now, but I’ve only recently started to have a look through some of the finer details. In particular, I’m looking out for the sections which will affect charities.

One change jumps out of a lot of the analysis produced by groups involved in charities: the effect of changes in income tax rates.

The basic rate of income tax was reduced in the budget. At first glance, this sounds like a good thing, but it has a knock-on effect on Gift Aid – the scheme where charities can reclaim the tax paid on donations received from UK taxpayers. For many charities, Gift Aid makes a significant difference to the income that they receive.

By reducing the basic rate of income tax the Budget has essentially reduced Gift Aid claims from 28.2% to 25% (from next April). After a little maths, this works out to meaning that (in order to keep the same level of income that they currently receive) charities will need each of their donors to add 25p to every pound that they currently give.

Or in other words, imagine a donor who currently makes a monthly direct debit of £5. They will now need to increase this to at least £7.20 a month for the charity to get the same amount of income (allowing for tax change and inflation).

Our imaginary donor may be unwilling to do this, which means that charities like us need to start planning now on how to handle this impact on fund-raising.

3 Responses to “Budget 2007 effect on Gift Aid”

  1. Howard Lake says:

    You’re right. The reduction in income tax could cause charities to lose £71 million, according to Charities Aid Foundation.

    UK Fundraising featured this development on 23 March 2007:


    To help charities recognise the impact this will have on their organisation, UK Fundraising created a free online Gift Aid loss calculator, together with our friends at iconcertina.com and Giving Matters:


    Charities are going to have to work hard just to ensure they maintain their current Gift Aided income once the tax reduction comes into force, let alone increase their Gift Aided income.

  2. Anton Piatek says:

    I believe the laws around gift aid have changed too. Entry fees must cost that little bit more than the normal price (at the visitors discretion) to qualify for Gift Aid status… which means tight people won’t be declaring gift aid.
    Then again, most places never present me with a gift aid form, so they never get the gift aid refund!

  3. dale says:

    Yeah, that’s true. Theres a good example of this on the Intelligent Giving blog: