§ I said at the beginning of this speech that this Budget would include incentives both to save and to give. I shall come to saving in a moment, but I want first to deal with giving. I have a number of proposals to help. We are by instinct a generous nation to causes that appeal to us. The tax system already offers a great deal of help to charities. It offers reliefs on their income and on their expenditure, and it provides incentives to encourage charitable giving. There is a relief for charitable covenants that has now been in operation for many years and is worth almost £200 million to charities every year. We have been considering how covenants can be made easier for charities and donors to use, and the Inland Revenue will therefore be issuing new guidance today to simplify them.
§ Since 1987, relief for covenants has been complemented by the payroll giving scheme, a very user-friendly way to relieve regular giving from tax. The scheme has been doing well since its launch, and I now propose to increase the annual limit from £480 to £600.
§ These reliefs are focused mainly on regular giving, which is of great importance to charities. However, they are ill suited to encourage the one-off gift which, for a variety of reasons, many people find more convenient. Over the years, that has been a persistent source of concern to charities. This year, I propose to go some way to meet that concern.
§ I propose a gift aid scheme that will, for the first time, give tax relief for large money donations. It is simply not practical to operate a relief for all small one-off gifts—and in any event, I do not wish to undermine regular giving through the payroll scheme and covenants, which are very important to some charities. Therefore, this scheme applies to larger donations.
§ The lower qualifying limit for gift aid will therefore be £600 per donation—the new ceiling for payroll giving. The relief will be available on one-off gifts up to an annual ceiling of £5 million per individual donor. The tax relief will be reclaimable by the charity, and payable to it at basic rate. As with covenants, the donor will get any higher rate tax relief that is due direct from the tax office.
§ This relief, which will apply to gifts by both individuals and companies, will come into operation from 1 October this year. I am confident that it will maintain and 1024 strengthen the growth of charitable giving, and I very much hope that charities will promote it actively. It will, of course, be open to the whole range of charities, from social causes to those whose activities are devoted to the arts.
§ I have a further measure to help charities. This is a package of value added tax reliefs, giving help especially to organisations engaged in sea rescue, medical care and research. These will come into effect on 1 May and give an additional benefit of about £5 million a year to charitable work. Full details are set out in a Customs and Excise press release issued today.