British Legion gift does NOT provide tax benefit to Blair

Look, I’m no fan of Tony Blair, but let’s be fair. Some of the media are implying that his gift to the Royal British Legion is a tax wheeze. The misleading headlines include “Tony Blair could save £2.3m tax on British Legion donation”.

All the tax relief does is to reduce the cost of the gift. And this is very different to the implication of the press reports.

The following numbers prove the point:

• Let’s assume Blair’s taxable income without the book is £10m. With the book advance/royalties it would be £14.6m. The bulk of this would be subject to 50% tax. Let’s say £7m in total
• By giving away the £4.6m Blair’s tax bill does indeed fall by £2.3m due to the 50% relief potentially available. But this isn’t the whole story.
• If Blair was keeping the advance etc he would have a net £7.6m left after tax (being the £14.6m less the tax thereon of £7m)
• By making the donation he only has £5.3m (being what’s left after paying tax on the £10m (£14.6m less the donation of £4.6m).

The key point is that he is still WORSE OFF to the tune of £2.3m. He’s not benefitting through making the donation.