The Autumn 2015 budget saw the announcement of new interest and dividend income allowances for individuals, which will come into effect on 6th April 2016. Our charity specialist, Zoe Perry, looks at how this could impact gift aid donations to charity.

What are the new income tax allowances coming in on 6th April?

An individual may earn up to £1,000 interest tax free (reduced to £500 for higher rate and £0 for additional rate tax payers). In addition, everyone can receive up to £5,000 in dividends tax free.

How could this impact on individuals who ‘gift aid’ their donations?

Claiming gift aid works on the basis that the donor has already paid income tax in any given tax year. There is no liability on charities to check each donor’s tax position, but the change may be of concern to individuals whose income tax bill is close to or less than the amount they are declaring for gift aid. In the worst case scenario, a tax liability may arise and donors may find themselves being chased by HMRC.

Zoe Perry comments: “the new tax-free allowances are seen as generous for individuals on the whole, but charities should be mindful that donors may be more cautious over their donations where their income is only just over the new tax thresholds”.

“In particular, elderly donors whose income may now not exceed the new thresholds could be caught out and therefore reduce their donations or be put off claiming gift aid altogether”.

“Charity trustees should be aware of the potential knock-on effect post 6th April and try to promote the vast benefits that gift aid brings to their charity in order to avoid any drop in donations”.

Did you know?

The Government have committed £45 million from the monies collected from banking fines to support many great causes over the next 4 years, including air ambulances, military charities and healthcare support services. For full details see: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508193/HMT_Budget_2016_Web_Accessible.pdf

Zoe Perry, Solicitor and Charity Specialist, can be contacted on 01905 730453 or zperry@thursfields.co.uk

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