From April 2013, the government will introduce a new scheme that will allow charities to claim Gift Aid on up to £5,000 of small donations without the need for Gift Aid declarations, the Chancellor, George Osborne, announced in the Budget today.
The Philanthropy Review, a group of sector leaders that is examining how to improve giving in the UK, recently called for a simplification of the rules covering Gift Aid on small cash donations after its first summit meeting.
It said that spontaneous small cash donations were worth about £1.7bn to the sector, but that Gift Aid could not usually be claimed on these because donors were not able to fill out the necessary forms.
Rowena Lewis, executive lead on the Philanthropy Review, told Third Sector it was delighted the government had recognised that now was the time to release these funds to charities.
"But this £5,000 threshold will exclude a significant proportion of donations where a charity raises more than this in spontaneous cash gifts," she said.
Hannah Terrey, head of policy at the Charities Aid Foundation, said: "Eighty per cent of charities don’t collect Gift Aid on donations of £5 or less, so this is welcome".
But she warned that breaking the link between the donor and the tax relief meant that Gift Aid on such donations could be seen not as a tax relief but as a grant or government expenditure.
"This means it could be at the whim of the government to get rid of it," she said.
A statement from the Institute of Fundraising said the announcement was a "welcome gift to charities of up to £1,250 a year".