Posted: 10 / 03 / 2025

Article by: Emma Houghton, Head of Not-For-Profit
Image: UK Parliament, CC BY 3.0 https://creativecommons.org/licenses/by/3.0, via Wikimedia Commons

The recent increase in employers’ National Insurance contributions (NICs) from 13.8% to 15%, effective April 2025, has raised significant concerns among UK charities, particularly smaller organisations that operate with limited budgets.

These charities, which provide essential services to communities, are now facing additional financial pressures that could impact their operations.

Impact on Charitable Organisations

Charities play a pivotal role in delivering public services and supporting vulnerable communities. The National Council for Voluntary Organisations (NCVO), representing approximately 17,000 charities, estimates that the NIC increase will cost the sector an additional £1.4 billion. This substantial rise comes at a time when many charities are already grappling with escalating operational costs, and without financial relief, many charities may be forced to cut services or, in extreme cases, cease operations entirely.

Government Response

In response to these concerns, the government has acknowledged the pressures faced by the charitable sector and the House of Lords has been proactive in seeking exemptions for charities. On 25 February 2025, peers voted to amend the National Insurance Contributions Bill to exempt small charities (those with revenues under £1million) from the NIC increase. Additionally, they proposed exemptions for health and care providers, including GP’s, dentists and pharmacists.

To alleviate the financial burden on smaller employers, including charities, the government increased the Employment Allowance from £5,000 to £10,500 with effect from April 2025. This adjustment aims to offset the NIC rise for eligible organisations, ensure that many smaller charities benefit or see no change in their NIC liabilities.

Despite these proposed amendments and adjustments, the government has not universally exempted charities from the NIC increase. The House of Lords’ amendments represent a significant push for sector-specific relief, but their implementation depends on further legislative processes and government approval. The government maintains that difficult decisions on tax and spending are necessary to address public finance challenges, but it acknowledges the valuable contributions of the charity sector.

Conclusion

The impending rise in employers’ National Insurance contributions presents a significant challenge for UK charities. Without targeted exemptions or financial support, many organisations may struggle to maintain their services, potentially leaving vulnerable populations without essential support. As the implementation date approaches, it remains crucial for the government to engage with the charitable sector to explore viable solutions that ensure the sustainability of these vital services.


Our next event: Sedulo x Trustist: Charity panel discussion

Tues 18th March, 4pm | Find tickets here →
Our next charity event explores the Fundraising Landscape as we begin 2025.

For more information about Sedulo Charity and our services, please contact our Head of Charity, em***********@se****.uk