Autumn Budget 2024: what does it mean for charities?

1. More funding for social housing

There will be an immediate one year cash injection of £500 million to top up the existing Affordable Homes Programme, which will deliver up to 5000 new social and affordable homes which should help charities in the sector. That said, what is gained on the one hand must be balanced with other proposals for change as there are plans to cap the rents social housing providers can charge their tenants under a new five-year social housing rent settlement on which the Government will be consult.

2. More funding for social care

Of the additional £1.3 billion new grant funding for local authorities, £600 million additional grant funding is to be provided to support social care in 2025-2026. Details of how this can be spent has yet to be provided but this should help charities in the sector.

3. More funding to support SEND

 State school funding is set to rise. The highlights are:

1. £2.3bn rise in the core school budget out of which an extra £1 billion is to be made available for SEND services representing a 6% real terms increase, which in turn should help charities providing SEND services to schools, but there are concerns that this funding increase is insufficient to fill the gap between the demand for SEND and existing local authority deficits
2. £1.4bn allocation to rebuild 500 state schools, including church schools
3. An increase in funding of the annual maintenance fund for schools by £300m
4. The budget for free school breakfast clubs will triple to £30m in 2025-2026.

Charities that work with state schools providing various support services will hopefully see the benefit from more resources generally in the system.

4. VAT on private school fees…

.. and the removal of business rates relief will put pressure on the business model of charitable independent schools and could strain independent schools' ability to offer bursaries to students from lower-income backgrounds. VAT on school fees will be effective from 1 January 2025 and the removal of rate relief will come in from April 2025 (subject to parliamentary approval). VAT on school fees will also apply to pre-payment of fees for terms starting on or after 1 January 2025 made on or after 29 July 2024.

5. Increased Employers' National Insurance and wages costs

Employers' National Insurance contributions (NICs) are set to rise by 1.2 % to 15% with the threshold at which employers start paying NI on salaries falling from £9,100 a year to £5000 a year and the national living wage is set to rise by 6.7% for employees over 21, both effective from 1 April 2025.

This will impact charities and other not-for profit organisations who may have to reconsider their staffing structures, possibly reducing the opportunity for pay rises hitting a market where retention of staff is already a challenge.

6. The VAT refund for listed buildings is set to expire in March 2025.

This has not been extended in the budget and is likely to impact on heritage charities and other charities with listed buildings such a churches.

7. Increased tax burden on businesses and wealthier individuals

The effect of the budget is to increase the tax burden on businesses and those subject to capital gains tax (increase from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers ) and a tapered increase in recovery for the government from business disposals (business assets disposal and investors’ reliefs) in addition to a range of changes to the inheritance tax rules are likely to impact most on the wealthier members of society. For further details see our summary of the key changes for individuals here. The implication for charities being a possible reduction in donations from corporate and individual wealthy donors although we will have to wait and see how this plays out as it remains the case that gifts to charities are exempt from inheritance tax (whether made during a person's lifetime or via their Will on death), and so donations to charities may, with a little tax planning, prove to be a more attractive way to reduce an individual's inheritance tax bill.

As with all budgets it is a mixed bag but additional funding of public services, particularly schools, social housing and social care are the key charitable wins. Though this is likely to be overshadowed by increased staff costs creating further stress on a currently stretched sector.