01/04/2012 19:09 BST | Updated 01/06/2012 06:12 BST

Why the Rich Are Rushing to Give Their Money Away by Good Friday

Whilst worrying about your tax bill is a fairly common anxiety for most of us, for wealthy people with a philanthropic bent, there's now the added pressure of giving as much of it as possible away before Good Friday.

Whilst worrying about your tax bill is a fairly common anxiety for most of us, for wealthy people with a philanthropic bent, there's now the added pressure of giving as much of it as possible away before Good Friday (6 April) in order to be sure of receiving the maximum tax relief on their donations.

Chancellor George Osborne's Budget announcement of a cap of £50K on Gift Aid tax-relief comes into effect from 6 April 2013, meaning that now is the critical time to make a major donation, before the current financial year ends on 5 April 2012.

Perhaps one of the least understood areas of charitable giving is the tax benefit that both the charity and the donor can receive. Whilst you're probably aware of the gift aid box that you tick when you make a charitable donation, and how it tops up your donation with an additional 20%-25%, you may be less aware of the generous tax relief you receive in return.

Whilst the total sum of this tax relief may be quite modest for most of us, for those tax-payers paying the top rate of tax and making 'major donations' this tax-relief can make a significant dent in their tax bill. It is this 'donor' tax relief that the government is proposing to cap at £50,000.

To look at the numbers, Steve Harvey, Head of Trust & Estate Planning at Coutts, calculates that under current regulations (which will remain in force until 6 April 2013) a donation of £100,000 made by a top-rate UK tax-payer would yield £125,000 to the charity, whilst costing the donor only £62,500 (after deducting tax relief of £37,500). The current set up actively encourages and rewards large-scale philanthropy of the kind that can sustain an organisation over time, allowing it to have long term plans and to focus its efforts on making a difference rather than hand-to-mouth funding.

Many charities in the UK are extremely concerned that what is fast becoming known as the 'charities tax' will deter the modest number of major donors active in the UK. Currently, the UK's culture of philanthropic giving is relatively weak (when compared, for example, to the US), and it is estimated that 45% of the total amount given comes from 7% of all donors (according the UK Giving 2011 Report).

Let's just rewind there for a minute. Almost 50% of the donations supporting charities in the UK (aka 'The Big Society') come from less than 10% of very wealthy donors. The very same donors that Osborne's 'charities cap' will effect the most.

You'd think that giving away money was pretty easy. However, like most things in life, doing it well is harder than it looks. Whilst established donors understand that giving large chunks of money away is a job in itself, new donors are often surprised to find that building a satisfying and effective relationship with a charity takes time. Time that Osborne's just cut short.

However, there are organisations that exist specifically to help philanthropists with their giving - the oldest being CAF (and its famous 'CAF cheques') and the newest being the Rainmaker Foundation, a 'collaborative charity' offering a bespoke advisory service to would be and established philanthropists.

Both offer securely managed financial systems where clients can tax-efficiently park funds before year-end. It's therefore possible for donors to deposit funds earmarked for donation before Good Friday (or possibly later using the 'carry back' system if the tax-return is submitted after that date) and still qualify for the current unlimited tax relief. The donor can then take Easter off, and has as much time as they need to distribute those funds effectively and with great pleasure.

However, the potential 'major donor gold-rush' of the next week aside, the 'charities tax' appears to be entirely at odds with the governments aim of encouraging philanthropy in the UK.

As recently as mid-March, Nick Hurd MP, Minister for Civil Society announced that the long awaiting 'Giving Summit' will take place in early May. This follows on from the Giving White Paper published by the Cabinet Office in 2011 which advocated a "focus on widening the base of people who give and on making giving easier."

Philanthropy UK, reporting on the the Minister's announcement of the Giving Summit quotes him as saying that "We want to help Britain become an even more generous country. It needs a new approach which is all about making it easier to get involved and make a difference."

Major charities and bodies including Cancer Research UK, Help the Hospice, CAF, Breast Cancer Care, The Royal Academy of Dance and a list which grows daily, are backing the Give It Back, George campaign which calls on the Chancellor to reverse his decision and exempt charitable donations from the plans to cap personal tax reliefs.

It will be a great shame if this May's Giving Summit is overtaken by this issue, instead of the government and the Third Sector working together to create what Mike Dickson, CEO and Founder of Rainmaker Foundation calls "a new age of generosity."

Let's just hope that the Treasury announces some changes before them, and that a full consultation schedule is announced as soon as possible. One of the many concerns that need to be addressed is the workability of the proposed cap, which would require that every single gift-aided donation be tracked. This will require massive administrative changes to all charitable reporting systems, including online platforms like JustGiving, at precisely that moment when charities may be facing a significant slump in major donations.

What's wrong with rewarding the rich for their generosity? Surely it is better that wealthy people are encouraged to offset their tax liability in a way that benefits society and helps build a culture of philanthropy that would make our Victorian ancestors proud.

Jody Day freelances for the Rainmaker Foundation as their 'Storyteller in Residence'.