Ministers should look at offering tax breaks to people who donate money towards reducing the country’s national debt, tax experts said, after the amounts received last year were “disappointingly low”.
While most people would not consider paying the government any more than they are legally required to, making “patriotic gifts” to the nation has a long tradition in the UK, dating back to the time of the Napoleonic wars.
Donations to the Treasury have dwindled in recent years, however, even as the country’s debt remains relatively high.
There were just 14 donations and bequests to reduce the national debt in the 2018-19 tax year, totalling £11,069, the UK Debt Management Office said.
By comparison, £10.1bn was donated by the public to charity last year, according to the annual report of the Charities Aid Foundation.
“We feel much more warmly towards helping out charities than helping out government,” said Tim Stovold, partner at accountants Kingston Smith. “The connection between the person on the street and government feels quite distant compared with a local charity.”
Unlike money donated to reduce the national debt, charitable giving has been boosted by a number of tax breaks. Gifts to charities are exempt from inheritance tax, with estates that leave at least 10 per cent of their wealth to charity receiving a reduction in the inheritance tax rate from 40 per cent to 36 per cent. Tax relief on charitable giving is also available during a person’s lifetime in the form of Gift Aid.
“You can imagine a canny chancellor thinking that [introducing a tax break on national debt donations] might be a way to deliver more revenue and boost these disappointingly low figures,” Mr Stovold said.
Jackie Hall, tax partner at accountants RSM, said the amount handed to the Treasury might go up if it attracted tax relief. She said: “At the moment a lot of people think: ‘I pay my taxes. Why do I need to pay anything else?’”.
National debt donations carry no tax relief, but political party donations offer relief on inheritance tax, noted Andy Wood, director at ETC Tax.
“Giving money to reduce the national debt is a much more altruistic thing to do but political party donations are what attract tax relief,” he said. “You could say that is quite self-interested on behalf of the parties.”
The total amount donated explicitly towards helping reduce the national debt in 2017-18 year was a tiny £762, given by just five people. In contrast five years ago, in 2013-14, the Treasury received a bumper £799,390 from 16 people — though this was skewed by some large property bequests.
Tax advisers said that despite the slide in donations in recent years, the small numbers of people involved make it unwise to use the data as a proxy for the national mood.
The national debt is the amount of money owed by the UK government and is largely a result of government financial liabilities on the bonds it has issued. The debt has been built up over many years by many governments and currently stands at £1.84tn — equivalent to 86.7 per cent of gross domestic product, according to data from the Office for National Statistics.