The rate of social investment tax relief will be set at 30 per cent, the Chancellor of the Exchequer, George Osborne, announced in his Budget speech today.
SITR, which will apply to investments made after 6 April, will allow investors who put money into regulated social organisations, including charities, to claim back part of their investments against their tax bills.
The government announced it would introduce SITR in last year’s Budget but had not set the rate until today.
The Budget document, published by the Treasury today, shows that the government estimates the scheme will cost the public purse £90m over the next five years. This amounts to £10m in 2015, £20m in 2016, £25m in 2017 and £35m in 2018.
The document says this year’s finance bill will say that eligible organisations will be able to receive up to €344,827 of investments over three years under the scheme, which is equivalent to about £288,500.
Nick O’Donohoe, chief executive of the social investment wholesaler Big Society Capital, said the relief would be attractive to wealthy people who were making venture capital investments, and would bring new finance to charities and social enterprises.
"Now is the time for investors to seize this opportunity to invest for social good and benefit from tax relief that is equivalent to existing schemes," he said.
Research from Big Society Capital has indicated that the scheme could raise £480m from individual investors over the next five years.
The Social Economy Alliance, a lobby group comprising more than 100 social enterprises and organisations, warned that the government would waste an opportunity to attract investment to the UK’s social economy unless it marketed the tax relief effectively.
Jonathan Jenkins, SEA member and chief executive of the social investor the Social Investment Business, said: "This will be a missed opportunity if it’s not fully promoted by government, who should work with the sector to market and promote the tax relief, so more businesses and investors can improve their social impact. This relies on the collaboration of the whole financial advisory community."
The final legislation on the relief will be published on 27 March.