Charities are losing out on as much as £750 million a year because of unclaimed Gift Aid, analysis from not-for-profit online giving service virginmoneygiving.com shows.

Good causes can benefit from 28% in tax relief on every donation if donors are UK taxpayers who fill in a Gift Aid declaration* – on an average donation of £31 that would be worth another £8.68.

But currently just 40% of donations claim Gift Aid and the proportion of donors using Gift Aid is only increasing marginally year-on-year leaving around £750 million unclaimed, according to virginmoneygiving.com analysis.

Its online giving service, which opened to fundraisers in October, is currently seeing Gift Aid uptake at 89% – more than double the UK average which helps deliver a significant boost to good causes.

Former Cabinet Minister David Blunkett has urged the Government to introduce an opt-out system for Gift Aid in order to dramatically increase uptake of the scheme.

However, despite being backed by the charity sector experts believe the scheme is unlikely to be introduced in next month's Pre-Budget Report.

Joanna Barnett, executive director of virginmoneygiving.com, said: “Charity funding is under severe pressure as donors cut back in the recession which makes it all the more depressing that Gift Aid is not delivering its full potential.

“More needs to be done to increase awareness of Gift Aid as it is a straightforward way to deliver extra funding to good causes across the country.

“We are delighted that we are delivering 89% uptake of Gift Aid but admit that there is no magic formula. Online giving makes it simpler to opt into Gift Aid as it minimises paperwork and form filling.”

Gift Aid usage in the year to 31 March 2009 is estimated at 40% compared with 38% in the previous year and 35% in 2006/07. Use of Gift Aid is much higher among donors giving large amounts – around 71% of donations over £100 use Gift Aid.

Research by virginmoneygiving.com among charities and fundraisers shows online giving is potentially more efficient than traditional sponsorship forms and collection tins and can increase the use of Gift Aid.