Charities concerned about losing more than £70 million in revenue once the new, lower, rate of tax comes into effect next month received an olive branch from the Chancellor.

Alistair Darling today reannounced that the basic rate of tax would fall from 22 per cent to 20 per cent from April. The Charities Aid Foundation said this could result in a loss of £71 million to the charitable sector, as the 2p cut in tax would mean that charities would only be able to reclaim 25p per pound donated, rather than the current 28p.

But the Chancellor announced he was setting aside £285 million to keep the rate at which charities can claim "Gift Aid" tax relief at 22 per cent for the next three years.

But less well-off workers were given scant compensation for the additional tax they will have to pay once the basic 10 per cent rate of tax is scrapped in April. When Gordon Brown announced the scrapping of the basic rate of tax last year, and the reduction in the basic rate from 22 per cent to 20 per cent, it emerged that workers earning less than around £15,000 a year would have to pay more in tax as they will be forced to pay 20 per cent tax on all their income above the tax-free allowance.

Background

• Darling's first Budget: the main points

• The Chancellor's speech in full

• Darlings first Budget: the reaction

• Chancellor hits the home budget as his debts soar

• Need to know: Budget 2008

Multimedia

• The winners and losers

Rose-tinted specs fail to offer hope

The obvious justification for Mr Darling’s relatively upbeat scenario is that the outlook is fraught with uncertainty

Multimedia

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Mr Darling did announce some increases in child benefit and the child element of the child tax credit, but workers without children will not benefit from these changes.

From April the basic rate of tax will fall to 20 per cent, down from 22 per cent. The 10 per cent starting rate of tax will be scrapped.

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