Autumn Budget: Themes, key announcements, and reflections for the Not for Profit sector

The Chancellor of Exchequer’s, Rachel Reeve’s, hotly anticipated Autumn Budget was significant, and focused on several key themes: rebuilding Britain, fixing the foundations, raising £40bn in taxes, and making difficult choices.

Detailed below are several of the key takeaways:

• Rates of Income Tax, employee National Insurance and VAT will not change
• The freeze on Income Tax and National Insurance thresholds will continue until 2028
• An increase in Capital Gains Tax from 10% to 18% at the lower rate and 20% to 24% at the higher rate; rates on residential property sales will not change
• The freeze on Inheritance Tax thresholds will remain until 2030
• Pension assets with be brought within the scope of Inheritance Tax from April 2027
• Non-domicile status will be replaced by residence-based tests; new rules will deal with those entering or leaving the UK.
• The Stamp Duty Land Tax surcharge, paid on second home purchases in England and Northern Ireland, will go up from 3% to 5%

Key announcements more likely to impact the Not for Profit sector included:

• Increased local government funding
  • A 3.2% rise in core Local Government spending, with at least £600 million in new funding for social care
• Support for individuals and carers
  • Reduced Universal Credit debt deductions, from 25% to 15%
  • Increases in the weekly earnings limit on Carer’s Allowance
  • Conducting an independent review of Carer’s Allowance overpayments.
• SEND support:
  • £1 billion (a 6% real-term rise) to support children with special educational needs and disabilities (SEND)
• Funding for hardship support
  • £1 billion next year to extend the Household Support Fund and hardship payments.
• Education funding
  • An additional £30 million for free breakfast clubs, £300m for Further Education and £2.3bn for Core Schools Budget

In the sections below, we reflect on the other announcements which arguably hold the most significance for the Not for Profit sector.

National Insurance and National Living Wage

• Employer National Insurance Contribution (ER NIC) rate will increase by 1.2 percentage points from April 2025, from 13.8% to 15%. It is estimated that this could cost the Not for Profit sector £1.4bn.
• The threshold on employee earnings at which ER NIC will apply will drop from £9,100 to £5,000.
• The National Living Wage (NLW) will increase by 6.7%, from £11.44 per hour to £12.21 per hour.

Based on an employee working 37.5 hours per week on a NLW contract, these announcements will increase the associated costs to the employer by 10.36%.

There are, however, several options which Not for Profit entities can consider in seeking to reduce the financial impact of these announcements, such as:

• Salary sacrifice for pensions
• Provision of benefits not attracting a Tax/National Insurance Charge, such as:
  • Use of small gifts exemption - £50
  • Annual staff Events - £150 per head per annum
  • Mobile Phones • Small Loans
• Tax efficient benefits, such as:
  • Electric cars
  • Cycle to work scheme

VAT on private education

• VAT is to be charged on private school fees for pupils aged from 5 to under 19 from 01 January 2025.
• The National Association of Special Schools (“NASS”) received permission from HM Treasury on Friday 25th October to share an update with its members.
• However, there could be some positive news for education institutions in receipt of special needs funding, including those which receive funding from Local Authorities towards their Education and Health Care Plans (EHCPs). It might be the case that VAT would be chargeable on these fees, potentially allowing education institutions to increase their taxable turnover and thus the amount of VAT they can reclaim

Clamp down on Tax abuse

From April 2026, new Tax rules will be introduced which:

• Prevent donors from obtaining financial benefit from their contributions
• Prevent misuse of charitable investment rules
• Address gaps in non-charitable expenditure rules
• Introduce sanctions for charities and Community Amateur Sports Clubs (CASCs) that do not meet their filing and payment obligations.

Housing, and Work and Welfare

• Housing
  • Consultation has begun on a new long-term social housing rent settlement of 1% above the Consumer Price Index for the next five years.
• Work and welfare
  • In the 2025/26 tax year, the Government will invest £115 million in ‘Connect to Work,’ a new supported employment programme.
  • This will match individuals with disabilities or health conditions to suitable job vacancies and provide the necessary support.
  • Also, funding for preventing homelessness will increase by £233 million in 2025/26 to reach £1 billion in total.

Many Not for Profit sector bodies have published their reactions, including the Charity Finance Group, who have also published a Policy Briefing for charities, and the NCVO, who have also published an open letter to the Chancellor.