1st June 2012
Chancellor George Osborne has dropped plans to limit the amount of tax relief on charitable giving, after listening to the concerns of charities.
It is the third Budget U-turn in less than a week after plans to charge VAT on hot foods and static caravans were also scrapped.
It was announced in March's Budget that all uncapped income tax reliefs would be limited to 25 per cent of an individual's income, or £50,000, whichever was the greater, including relief on charitable donations.
In a televised interview with the BBC, George Osborne said: "I can confirm that we will proceed next year with a cap on income tax reliefs for wealthy people, but we won't be capping relief for giving money to charity.
"It is clear from our conversations with charities that any kind of cap could damage donations, and as I said at the Budget that's not what we want at all. So we've listened.
He added that the Government was instead focusing on 'keeping Britain safe from the gathering storm' from issues such as the worsening Eurozone crisis and the country's deficit.
George Osborne was previously reported to be 'shocked' at the level of tax avoidance by some individuals who had taken advantage of tax breaks on charitable donations, saying the system was being 'abused.'
Chief executive of the Charities Aid Foundation, John Low, who had campaigned against the cap on charitable donations, said he was 'delighted' with the Government's response.
"We realise the Government is responding to truly exceptional financial circumstances and is having to make tough decisions about public finances. We acknowledge and welcome the Chancellor's decision to do the right thing and exempt charity donations from the cap," he said.
The move follows Treasury minister David Gauke's announcement earlier in the week which said the Government was to abolish the proposed 'pasty tax' after listening to 'representations' from the industry. It had originally planned to charge VAT on all hot takeaway food. However, food such as pasties or sausage rolls sold cooling on shelves (as opposed to being kept hot) will now not be liable for VAT.
Its 20 per cent VAT charge on static caravans -to bring them in line with mobile ones - has also been reduced to 5 per cent and delayed from October to April next year.