Chancellor, Jeremy Hunt, released his Autumn Statement on 22 November 2023, covering 110 different measures.
As is often the case with taxation changes brought in by a government, this statement represents a reshuffling of the deck, with some headline tax reductions, whilst other tax increases are perhaps more hidden.
The challenge is not necessarily picking apart what was in the statement, but what was left out.
This article covers the key changes that will affect the charity sector…
What announcements will specifically affect charities?
The chancellor’s big move in the statement was to reduce employees’ National Insurance from 12% to 10% in January 2024. Initially, this appears entirely positive; however, in April 2021, income tax bands were frozen (until 2028) and due to significant inflation in recent years, this will lead to a significant number of people paying more tax. This effect is known as fiscal drag.
National Living Wage
There will be an almost 10% increase in the National Living Wage to £11.44 an hour from 6 April 2024, that will be extended to 21 and 22-year-old workers. Salary increases for those receiving the lowest income will positively affect many beneficiaries of the charity sector. However, this will also increase wage costs for civil sector organisations, who are already struggling with the dual pressure of decreasing public donations and rising costs.
From 6 April 2024, Universal Credit and other working-age benefits will increase by 6.7% to reflect the inflation rate in September.
There will be some notable changes to how the benefits are assessed:
The Work Capability Assessment will be reformed in line with the modern trend of working from home. This will mean some with health conditions and disabilities will be incentivised to find applicable jobs.
There is some nervousness as to how the implementation of the assessments will be carried out and under what criteria. It’s fair to say there hasn’t been the best track record for these assessments in the past, with benefits on a conditionality or sanctions basis. These reforms may impact vulnerable people, and consequently the charity sector may need to step-in where individuals might need support, due to their benefits to be withdrawn.
The Local Housing Allowance, which determines the level of housing benefit and Universal Credit people receive to pay rent, will be increased to 30% of local rents, as the price of renting has risen by almost a third since 2020. However, these rates will be frozen from 2025/26. This initial change has been welcomed but warrants more attention in the years to come, to keep pace with rent rates.
£120 million was committed to prevent homelessness. This announcement has been received with mixed feelings by the organisations that work in the sector. Homelessness is a complex area; this pledge is a positive gesture, but perhaps not enough to face the challenge at hand.
Prior to 2013, VAT relief was available for the installation of energy saving materials in charitable premises. However, this was withdrawn as being inconsistent with EU law.
Since then, the relief has been reintroduced and, following a call for evidence, the government will now expand the measure to include additional technologies such as water-source heat pumps. This will bring buildings used for solely charity related purposes back within scope.
These reforms will be implemented UK-wide in February 2024.
In the Spring Budget, the chancellor committed £100 million to the sector, but most of this funding was attributed to organisations helping with the cost-of-living crisis. Consequently, charities providing support in other areas have continued to feel the strain.
Specific areas of funding to tackle antisemitism and veterans’ mental health were mentioned in Mr. Hunt’s Autumn speech, but many would like to have heard more about wider sector support.
Whilst these are some of the headlines, the full Statement includes 110 measures, so we encourage you to rely on it for the comprehensive detail on the reforms.
What are the experts saying?
Sarah Vibert, Chief Executive, National Council for Voluntary Organisations
‘Not uplifting grants and contracts to cover the true cost of delivering them means some charities will be forced to close or reduce the services they offer, leaving people at risk.’
Sam Mercadante, Policy and Insight Manager, National Council for Voluntary Organisations
‘The chancellor’s stated goal was to focus the Autumn Statement on policies that promote economic growth. We are disappointed that none of today’s announcements will deliver improved growth and stability for the voluntary sector.’
Richard Bray, Chair, Charity Tax Group
‘Along with others, CTG had argued for the introduction of some simple and inexpensive reforms, particularly in relation to goods donated by businesses to charity. Their absence and the general lack of acknowledgment of charities is a significant disappointment.’
Matt Whittaker, CEO, Pro Bono Economics
‘The charity sector has already been running hot while dealing with the triple threat of elevated demand, higher costs and falling donations. This precarious balancing act is set to continue.’
Need some guidance?
The charity sector is particularly vital in these uncertain times. Burton Sweet has a longstanding commitment to charities and civil society organisations, offering practical, professional and passionate support. We want to assist you, so you can deliver effectively for the communities you serve and show the good you do.
To discuss any of the topics covered in this article, please contact us and we will be happy to help…