Charities have escaped a potentially damaging loss of income after the Chancellor introduced a special transitional rate for gift aid in the Budget.
There had been fears that next month's cut in the lower rate of income tax would see charities lose out by as much as £90 million a year.
The drop in the basic rate of income tax from 22 per cent to 20 per cent would have affected the amount charities can claim in tax on one-off donations.
Currently, gift aid means that every £1 donated is actually worth £1.28 to the charity.
The worry was that the lowering of income tax rates would have reduced the amount charities could claim to £1.25 for every pound donated.
However, the Chancellor's decision to allow the 22 per cent rate to stand for gift aid for the next three years will provide charities with an extra £270 million of income.
John Low, chief executive of the Charities Aid Foundation (CAF), said: "It is a huge relief as we feared charities were going to lose in excess of £90m a year when the basic rate of tax comes down next month. This will give charities a chance to adjust to the new lower rate."
Date:14 March 2008
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