The Chancellor has dropped plans to limit tax relief on individual charitable giving after mounting protests from charities.
This is the latest Budget policy U-turn after the government relented on the ‘pasty tax’ and caravan taxes earlier this week.
Osborne said in the Budget that from April 2013 the maximum amount that would be able to be reclaimed in tax relief, including on charitable giving, was set at 25% of income or £50,000, whichever was greater.
Not long after he told The Telegraph he was "shocked" by the scale of tax avoidance and the charity tax relief was a specific loophole he wanted to close.
By mid-April the controversy surrounding the charity tax relief cap had wreaked havoc causing shock waves across both the charity and business sectors.
Charity bosses waded in claiming the proposed cap would cause major donations to stop and the government finally conceding it would reconsider the proposals.
A Treasury spokesperson said today that the uncertainty caused by the cap created a risk to the charitable sector and as a result the government decided to exempt charitable reliefs.
Osborne said: "I can confirm that we will proceed next year with a cap on income tax reliefs for wealthy people, but we won't be capping relief for giving money to charity.
"It is clear from our conversations with charities that any kind cap could damage donations, and as I said at the Budget that's not what we want at all. So we've listened.”
Caron Bradshaw, chief executive of the Charity Finance Group (CFG) applauded the government for taking a “brave step”:
“We previously made the point that as charities are suffering unprecedented levels of financial pressure, the cap on tax reliefs could not have come at a worse time. Hopefully the message sent out by the Chancellor today will go some way to addressing the damage that had been caused by this step.”
The consultation on how a cap will be imposed on the other tax relief measures is expected to continue this summer.