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Three-year transition period for Gift Aid relief when basic income tax rate falls to 19%

Melanie May | 29 March 2022 | News

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Rishi Sunak announced plans to reduce the basic rate of income tax to 19% from April 2024 in his Spring Statement last week.

The change will be implemented in a future Finance Bill, and to alleviate the reduction in Gift Aid that would otherwise follow, the government has promised a three-year transition period for Gift Aid relief. This will maintain the income tax basic rate relief at 20% until April 2027. 

Charity Tax Group (CTG) representatives have spoken to HMRC officials and understand that the transitional relief mechanism will operate in the same way as it did previously. CTG is also seeking clarification as to whether it will be applied to GASDS.


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The CTG estimates that without the transition support, the sector would lose around £250 million between 2024 and 2027.

CTG Chair Richard Bray commented:

“On its own the announcement that the rate of income tax will decrease from 20% to 19% in April 2024 would have cost the charity sector approximately £250m in lost Gift Aid over three years. However, the proposed transitional relief will safeguard over £250m of charity income. CTG both suggested and campaigned hard for transitional relief when the basic income tax rate was last decreased in 2007 and we are grateful that the Government has had the foresight to introduce a similar measure to protect Gift Aid now. CTG will continue to campaign for an improved Gift Aid system that can result in more Gift Aid being claimed by the time the transition period ends.


“The Chancellor’s Statement introduces a number of important measures, some of which will help charities as employers.  He has also shown flexibility on VAT and R&D tax reliefs to stimulate investment in renewable energy and in R&D.  In the wake of a global pandemic, we urge the Chancellor to take the opportunity to reintroduce R&D tax credits for charities and to recognise the Government’s ability to introduce new VAT rates that could benefit those charities providing much-needed services.”

Gift Aid was worth £1.38 billion to charities in 2020/21 according to HMRC data, remaining largely stable during the pandemic. However, research from nfpResearch suggests public awareness has declined. For a number of years, it has tracked knowledge and understanding of Gift Aid by asking people whether they have heard of the scheme and asking them to select the correct definition among several options.

In 2010, 88% of respondents claimed to have heard of Gift Aid and of those, 82% correctly identified it as a method for charities to claim back tax on donations. By 2021 these figures had dropped to 73% and 66% respectively. This, nfpResearch says, means that the overall proportion of the public correctly able to define Gift Aid dropped from 72% to 48%.