Amid indications of another post-Budget climbdown from Coalition ministers, government has announced another major U-turn today, scrapping George Osborne’s so-called “Charity Tax” proposal.

Charity Tax U-turn is the government’s fifth U-turn this weeks after U-turns on the pasty tax, the caravan tax and VAT on listed buildings alterations. But, the charity tax - a clampdown on tax relief for gifts - is the biggest till now, as the move was expected to raise £400 million for the Treasury.

Currently, higher–rate taxpayers donating to a charity can reclaim more than half of the income tax they have paid on the money, irrespective of the amount involved. Describing the tax proposal as ‘unfair, the Coalition had argued that it wanted to limit the ability to reclaim tax on donations of £50,000 per year, or a quarter of the individual’s income, whichever is higher.

“It is clear from our conversations with charities that any kind cap could damage donations, so we’ve listened”, said the Chancellor. The Treasury said it will now exempt charities from plans to limit tax relief on large donations to £50,000 a year from next April.

“We are delighted that the Government has responded to the challenging calls from philanthropists and charities across the country and taken the bold decision to exempt charitable donations from the cap on tax relief”, said CAF chief executive John Low, welcoming the policy reversal.

The U-turn came as Jeremy Hunt gave evidence to the Leveson inquiry and limelight was on Andy Coulson, who has been charged with perjury.

Related:
George Osbourne’s Pasty tax binned after public backlash
Andy Coulson, ex-editor of Rupert Murdoch’s newspaper, detained for perjury

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