On 26 November 2025, the Chancellor delivered her Autumn Budget. Charitable organisations across the UK were eager to see how the announced changes would affect them.
Here’s a summary of the key changes for the voluntary sector…
Two-child benefit cap
From April 2026, the cap that limits households receiving Universal Credit or Child Tax Credit from receiving further payments for a third or subsequent child will be removed.
This is estimated to lift 450,000 children out of poverty, which should reduce families having to rely on charities for support. Hopefully, this will ease pressure on some frontline services.
Minimum Wage, National Insurance & salary sacrifice
From April 2026, the National Minimum Wage for those aged 21 and over will rise from £12.21 to £12.71 per hour. Those aged 18 to 20 will see an increase from £10 to £10.85. The under 18s and the apprentice rate increase from £7.55 to £8.00.
On the one hand, this is a positive step to ensure working people are paid fairly, so they can afford the basics and don’t have to ask charities for support. On the other, this will put additional strain on charities’ budgets as the cost of employment rise.
Additionally, thresholds for National Insurance paid by employers will be frozen until 2031, increasing wage demands over time.
Currently, a salary sacrifice scheme allows employers to pay part of your gross salary directly into your pension, which therefore means that it is free from Income Tax and National Insurance. However, from April 2029 a £2,000 cap will be introduced above which the contributions will be subject to employer and employee National Insurance. This will further increase employment costs for charities.
Income Tax
The personal allowance (for most, earnings above £12,570) and personal tax thresholds will be frozen until 2030/31.
Due to inflation, this will drag more people into higher bands, reducing the disposable income of many. Consequently, charities are likely to receive fewer donations, increasing demand on their services whilst making them more vulnerable.
However, with increasing numbers of people becoming taxpayers, charities should continue to remind donors of the benefits of Gift Aid and encouraging more people to ‘tick the box’ when making an eligible donation.
VAT relief
From 1 April 2026, a new VAT relief will be introduced for business donations of goods to charities. These goods must then be distributed to those in need. This applies to charities registered with HMRC, or the appropriate regulator.
There will be a £100 per-item value limit, with a higher £200 limit for a set list of goods, including furniture, carpets, computers, phones, and white goods. Valuation will either be decided by the original cost price or the item’s value at the point of donation, with appropriate adjustments for age and condition.
It’s hoped that this initiative will increase charitable donations by business and limit the volume of goods sent to landfill or disposal centres.
Taxes
Inheritance Tax thresholds will be maintained until 2031, so more estates will be liable. In theory, this should increase legacy income for charities.
From April 2026, tax on dividends will increase by 2% for basic and higher rate taxpayers. Additionally, tax charged on rental income will increase by 2% from April 2027. This may negatively affect funding from donors who receive income from these sources.
Need some guidance?
There’s been a mixed reception to the Autumn Budget from trustees and charity staff. Some of the changes have been welcomed, while many say it offers insufficient support for the sector, which is experiencing exceptional demand. Most agree that its contents were not as harmful to their activities as last year’s statement.
Whilst these are some of the key announcements, we encourage you to check out the full budget to explore the reforms above in more detail and stay abreast of other changes.
If you require any guidance as a result of any of the changes made in the Autumn Budget, please get in touch with us. A member of our team will be happy to assist you…
