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Impact of the November 2025 Chancellor’s budget on the UK charity sector

The Autumn Budget of 26 November 2025, delivered by Chancellor Rachel Reeves, was widely viewed by the voluntary sector as a “mixed bag” containing a handful of welcome measures but intensifying many long-running structural pressures. Overall, it offered limited direct support for charities at a time when demand, costs, and financial pressures remain exceptionally high.


Below is a summary of some of the key areas impacting charities:

Increase in National Living Wage (NLW) and National Minimum Wage (NMW)

 

These increases support fair pay but significantly raise payroll costs for labour-intensive charities (social care, retail, community services). Many organisations already struggle to maintain staffing levels, so these changes may lead to:

  • Reduced service hours
  • Delayed recruitment
  • Pressures to raise supervisory pay to maintain internal pay ratios

Fiscal Drag and Donor Behaviour

 

The extended freeze on tax thresholds is expected to pull more people into tax-paying or higher tax brackets over the coming years. Consequences for charities include:

  • Reduced disposable income for donors
  • Potential reduction in regular giving

 

VAT Relief on Business Donations

 

One of the most celebrated measures is the introduction of VAT relief on donated goods from businesses (effective 1 April 2026). Impacts include:

  • Encourages companies to donate surplus goods
  • Reduces costs for charities such as food banks and homelessness services
  • Helps divert usable items from landfill
     

Contact Us

James Cowper Kreston is a leading firm of accountants and business advisers, with offices across the South of England. Many of our partners and senior staff are trustees for charitable organisations so have an in-depth understanding of your operations and how to maximise your charities potential. 


If you would like to discuss this topic further, then please contact a member of our charities team at James Cowper Kreston.


Kind regards

Darren O'Connor | Partner

T: +44(0)7990 525362

E: DOconnor@jamescowper.co.uk
     
   
   

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