The latest Budget introduced by the Government may not have included major headline announcements for the charity sector, but it still contains measures that could have a significant impact.
While there are no direct boosts for charities, changes to employment costs, tax rules, and public funding priorities will shape the landscape in which organisations operate.
As specialists in accounting for charities, we want to help you prepare for the changes ahead.
A tax on employment
One of the most immediate impacts for charities is the increase in Employers’ National Insurance (ER NI) contributions, rising from 13.8 per cent to 15 per cent, with the threshold lowered from £9,100 to £5,000.
However, the good news is the Employment Allowance has increased from £5,000 to £10,500, offering significant relief, especially for smaller charities. Larger organisations will also benefit, as the £100,000 cap for claiming this allowance has been removed.
Alongside this, the minimum wage for 18–20-year-olds has been increased by 16.3 per cent to £10 per hour, and the National Living Wage will rise to £12.21 per hour from April 2025.
While this supports fair pay, charities will need to account for these above inflation rises, particularly as funding streams remain under pressure.
Tax compliance: Increased scrutiny
The Budget has signalled a focus on closing the tax gap, including measures to prevent tax abuse in the charity sector.
From April 2026, strengthened rules will address areas, such as misuse of charitable investment rules, gaps in non-charitable expenditure regulations, and ensuring donors do not receive financial benefits from their contributions.
Charities should review their governance and compliance processes to ensure they remain on the right side of these updated regulations, as HMRC is expected to take a stricter approach.
Limited support for the charity sector
The Budget themes of “Rebuilding Britain” and “Fixing the Foundations” emphasised public infrastructure and housing but offered little direct support for charities.
Notable omissions include the lack of action on proposals such as increasing charity tax limits, consulting on VAT relief for donations, or extending charitable rate relief to wholly-owned charity trading subsidiaries.
One small mention of potential future support is the development of a social investment vehicle, aiming to bring together Government, socially motivated investors, and the voluntary sector. However, this initiative remains light on detail for now.
Public funding and sector opportunities
Some areas of public funding may indirectly benefit charities. Key allocations include:
Charities working in these areas should assess how they can align their services to benefit from the additional funding and ensure their programmes match government priorities.
Adapting to a changing landscape
While the lack of significant direct support for charities in the Budget may feel like a missed opportunity, the changes announced highlight the importance of proactive planning.
At times of change, charities must adapt to remain resilient. If you need advice on how these Budget changes could impact your organisation, our team is here to help.
We specialise in supporting charities with financial planning, compliance, and maximising funding opportunities. To find out more, speak to our team.
