BUDGET 2011: Death duty sweetener to boost charitable giving

Major tax changes to encourage charitable giving formed a key part of the Budget.

Under the measures, inheritance tax would be cut by 10 per cent for anyone giving up more than a 10th of their legacy, in a move aimed at boosting philanthropy among the rich.

The Chancellor was also set to extend tax breaks to small collections by scrapping red tape around Gift Aid. The £630 million package is aimed at boosting the Government's Big Society agenda, and comes after it promised to build a stronger culture of giving.

Inheritance tax is levied on money or possessions worth more than £325,000 when people die. A taxable estate of £1 million would currently attract death duties of 40 per cent - but that would fall to 36 per cent for anyone giving more than 10 per cent to charity, under today's expected proposal.

The move, known as "10 for 10", would cost the Treasury in the region of £170 million a year by 2015/16 but would be worth about two-and-a-half times that to charities.

Mr Osborne was also set to announce that Gift Aid will be available to collections of up to £5,000 without the need for form-filling.

Gift Aid boosts donations by at least 20 per cent, by allowing tax to be reclaimed. But to benefit from it at present, charities must get donors to sign a slip declaring they pay taxes in the UK. This makes it almost impossible for small campaigns, such as bucket collections at school concerts or money raised through church bake sales, to get the boost.

The proposed changes would mean £200 raised at a small event would now be worth £240. Ministers say they want to revolutionise giving in Britain. A "Giving Green Paper" unveiled in December proposes measures including greater recognition for donors, and methods to make donating easier - such as through cash machines or mobile phones.