Higher rate tax relief for charity donations hits £520m

Wealthy donors gave the largest share to charity as they gain the most from tax relief with the latest HMRC figures showing that charity tax relief jumped to £3.8bn

Wealthy donors with an income of more than £250,000 made up the largest share of the total value of all charitable gifts, according to new figures released by HMRC today.

The figures showed that 59,000 donors with income above £250,000 declared a total of £1.6bn in charitable gifts through their self assessment forms in 2017-18, up 9% from £1.4bn the previous year from 54,000 donors. HMRC said this was most likely because these 'individuals gain the most tax relief by declaring their donation'.

HMRC estimated the higher rate tax relief on gift aid cost £490m in 2017-18 and expected this figure to rise to £520m in 2018-19. Higher rate relief effectively reduces an individual’s gross income for tax purposes, therefore cutting an individual’s tax bill, a relief that is particularly advantageous for those required to pay income tax at the higher rate of 40% or the additional rate of 45%.

The overall value of individual donations declared through the self assessment system has almost doubled in the 10 years since the financial crash – in 2008-09 the figure stood at £1.682bn compared with £3.179bn in 2017-18.

For 2018-19, the total amount of tax relief for individuals was estimated to be £1.53bn for 2018-19, an increase of £30m on the previous tax year. The total amount of tax relief to charities was £3.79bn, an increase of more than £100m since the previous tax year. Both continue to follow a long-term upward trend, according to HMRC.

The largest relief for charities in 2018-19 continues to be non-domestic rate (business rates) relief, estimated at £2.22bn, an increase of £60m on 2017-18. Inheritance tax relief continues to be the largest relief for individuals, estimated at £890m.

Philip Smith

Philip Smith |Contributing editor, Accountancy Daily

Philip Smith is contributing editor at Accountancy Daily and a freelance journalist specialising in accountancy and tax matters. He ...

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