In the face of protests from charities, the Chancellor has scrapped plans to limit the amount of tax relief available on charitable giving.
The Chancellor had announced, in this year's Budget, the introduction in April 2013 of a cap on income tax reliefs, limiting relief to £50,000 or 25% of income (whichever was higher), which would have affected tax relief on charitable donations. This was in an effort to clamp down on wealthy individuals who use tax relief as a means of lowering the amount of income tax they pay.
However, the planned cap was opposed by charities with many claiming that they rely heavily on large donations from individuals and that such donations would dry up in the absence of tax relief. The forecast cost to charities in lost donations was perceived to be far higher than the extra revenue that the Revenue would get.
The announcement is widely welcomed and is the most recent in a number of changes to Budget policies. However, the proposed cap on tax relief generally will still proceed albeit that it will not include donations to charity. The main focus of the proposed cap is likely to be the amount of previous business losses that can be offset against future taxable profits.
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