House of Lords Votes to Exempt Small Charities from NICs Increase
· Posted on: March 20th 2025 · read
The House of Lords has voted to exempt smaller charities from the upcoming rise in employer National Insurance Contributions (NICs), as recently reported by sector news outlet Civil Society.
The amendment, would apply to charities with an annual revenue of less than £1m, shielding them from the planned increase from 13.8% to 15% starting 1 April 2025. The amendment was backed by 235 peers, with 149 voting against it.
The NICs bill will now proceed to a third reading in the House of Lords next month.
- Financial Impact on Charities: The NICs rise is expected to cost the charity sector an additional £1.4bn annually. While small charities would be exempt if the amendment passes, medium and large charities will still face increased costs.
- Government’s Position: The Government has resisted broader exemptions but points to the Employment Allowance, which has been increased to £10,500. This means that more than half of businesses and charities with NIC liabilities will see no change or a reduction in their tax burden.
- Sector Response: While charity leaders welcomed the exemption for small charities, they argue it does little to help medium and large organisations that will bear most of the additional costs.
This development provides relief for smaller charities but leaves medium and large organisations to absorb higher employment costs. Not-for-profit entities should review their financial plans and consider how to manage rising expenses.
The sector continues to advocate for further exemptions, and charities should stay informed about potential policy changes that could impact their operations.
