One of the consequences of reducing the basic rate of income tax to 20% (from 22%) from 6 April was a loss of income to charities. Before, in order for a charity to get £1 in its coffers, you gave them 78p and the government topped it up with another 22p - in other words the government gave it 28% on top of your donation. After, in order for a charity to a charity to get £1 in its coffers, you would give them 80p and the government would top it up with another 20p - in other words, the government would just give it 25% on top of your donation.
In practice, of course, we weren't all going to suddently start increasing our charitable donations from 78p to 80p (or whatever). We'll carry on paying £x a month or a year, resulting in a loss of income to charities.
There was a fair amount of negative publicity about this (presumably unintended) consequence of the decrease in basic rate tax. As a result, in the budget the Chancellor announced that the government would carry on topping charities' coffers up at 28% for the next three years, to soften the impact.
Of course, they waited until three weeks before the change was due to come in before announcing this. I was reminded of this today when looking at a leaflet from the National Trust that assures me that, if I tick the Gift Aid box, each £1 I donate to them will be worth £1.25. It won't now - it'll be worth £1.28. But the National Trust, being responsible and thinking ahead, have now presumably got millions of leaflets that are factually inaccurate to get rid of.
More significantly, no doubt some charities have had the foresight to ask their donors to up their contributions to make up for the reduction in the tax break. Now that the tax break has been temporarily restored, are they to contact all those donors again to ask if they'd like to reduce their contributions to their previous level?
Once again, this is what happens if you make up taxation policy as you go along.
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