This week’s Autumn Budget brought several changes that affect the charity and voluntary sector. While not as headline-grabbing as some business measures, there are key updates that trustees and charity finance leads should be aware of.
Here’s our breakdown of the announcements most relevant to the charities we work with.
1. Removal of the Two-Child Benefit Cap
From April 2026, the two-child limit on Universal Credit will be lifted. This is expected to reduce child poverty and ease pressure on some families who would otherwise turn to charities for support.
While not a direct funding change, this is a significant policy shift that could affect the level of demand experienced by family and poverty-focused charities
2. VAT Relief on Donated Goods
From 1 April 2026, a new VAT relief will apply to business donations of goods to charities, as long as they’re for use in charitable activities or direct distribution to those in need.
- Relief will apply to donated goods valued up to £100
- Higher limit of £200 for items like laptops, carpets, and white goods
This change is designed to encourage corporate donations and reduce waste. It could be especially helpful for charities supporting low-income families or furnishing housing placements.
3. National Living Wage Rises
From April 2026, the National Living Wage will rise by 4.1% to £12.71 per hour for workers aged 21+. Minimum wage for 18–20-year-olds will also rise by 8.5%.
Charities with paid staff at or near minimum wage will need to factor this into payroll budgets. This could increase pressure on core costs, particularly for those delivering frontline services
4. Pensions and National Insurance
From 2029, National Insurance relief on salary sacrifice pension contributions will be capped at £2,000 per person per year.
Charities offering generous pension arrangements through salary sacrifice may see their NIC costs increase from that date. While implementation is some time away, it’s worth including in long-term planning and staff consultation
5. Office for the Impact Economy
The Government reiterated its support for the Office for the Impact Economy, which aims to bring together social investors, philanthropists, and government funding. Current programmes include:
- The Pride in Place programme (supporting deprived communities)
- The Better Futures Fund (targeting vulnerable children and young people)
This may offer future funding and partnership opportunities, especially for charities working in place-based or youth-led services.
6. Charity Tax and IHT Clarifications
Some previously announced measures were confirmed in the Red Book, including:
- Changes to charity tax compliance
- Unused pension funds being included in the value of an estate for Inheritance Tax purposes
- These will be legislated in the Finance Bill 2025–26
It’s worth keeping an eye on how these developments may affect legacy planning or charity-administered estates
Summary: Key Actions for Charities
Here’s what trustees and charity managers should consider:
- Budget for wage increases and adjust forecasts for 2026-27
- Explore how new VAT relief could benefit your organisation or clients
- Review pension arrangements and consider future cost implications
- Stay informed on impact economy initiatives that may lead to funding opportunities
- Keep in contact with your accountant or examiner to prepare for changes.
