THE cap on tax-free charity giving is likely to be lifted after philanthropists threatened to cut funding to good causes, The Daily Telegraph can disclose.

Nick Clegg made it clear that the Government was preparing to climb down at a private Whitehall reception for rich charity donors.

The Deputy Prime Minister told them that the Coalition had been “beaten around the head and neck” and wanted to encourage them to give.

He told the philanthropists: “We need a cool look to understand it properly and hopefully get back to Britain being a great place to give.”

Currently, higher-rate taxpayers donating to a charity can reclaim more than half of the income tax they have paid on the money without limit.

From April 2013, they will only be able to reclaim tax on donations up to £50,000 per year, or a quarter of the individual’s monetary policy committee have previously accepted such a link because QE money buys government bonds, the basis of most pension annuities, and higher demand pushes down the interest paid on them. income, whichever is higher. Ministers say the change, part of last month’s Budget, will prevent “abuse” of the tax system.

But charities say it will cost them millions of pounds. Combat Stress, an Armed Forces charity has written to more than 200 MPS warning that it will affect their ability to help veterans.

It is understood that an outline compromise was agreed at a meeting with David Cameron on Tuesday, before the reception. Discussions of how it might work are going on in Whitehall and could be announced next month.

The most likely option is to create a separate limit on charitable donations, possibly of 50 per cent of a person’s income, as in the United States.

Mr Clegg made passing reference to the reception when he was pressed on the matter on Radio Four’s Today programme yesterday.

He also said that he was proud that Liberal Democrats in the Government were being “courageous and bold”.

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