Budget 2024: Key implications for charities

The 2024 budget sets out the new government’s tax, welfare, and spending priorities up to March 2026, with a framework for spending beyond April 2026.

The Institute for Fiscal Studies calls this the most important budget since the 2010 austerity measures. It reveals the government's priorities and expected trade-offs.

This budget also previews the spring spending review, which will allocate funding for central government departments through to March 2029.

Several budget measures will likely help the voluntary sector and the communities it supports. They include:

• 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: Reduce Universal Credit debt deductions (from 25% to 15%). Raise the weekly earnings limit on Carer’s Allowance. Conduct an independent review of Carer’s Allowance overpayments.
• SEND support: £1 billion (a 6% real-terms 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.
• Funding for Holocaust education: An additional £2 million to support Holocaust education charities.

New financial pressures on charities

The 6.7% rise in the national living wage and the increase in employer National Insurance contributions (NICs) to 15%, both effective from 1 April 2025, will bring significant financial pressures for charities. Additionally, the NIC threshold has dropped from £9,100 to £5,000.

While fair wages are essential, these rising costs will intensify the “triple squeeze” charities face from increasing costs, reduced funding, and higher demand.

Smaller charities, in particular, may need to shift already limited resources away from essential services, putting the communities they support at risk.

That’s why we, along with our sister councils across the UK, wrote to the Chancellor last week to urge her to reimburse charities for these costs, as she has committed to do for public sector organisations.

Read the full letter to the Chancellor.

Additional budget measures

Additional budget measures that may impact voluntary organisations and their communities include:

• Increased Charity Commission budget from April 2025, alongside a 3.5% real-terms reduction in the DCMS budget.
• £240 million for local "trailblazer" programmes. They will streamline work, health, and skills support for inactive individuals.
• Changes to VAT and business rates relief for private schools. VAT relief is removed. Business rates relief is for those providing full-time education to pupils with education, health, and care plans.
• New legislation to prevent charity tax rule abuses set to take effect in April 2026.
• £26 million for mental health crisis centres.
• £300 million for further education and £40 million for the Growth and Skills Levy (formerly the Apprenticeship Levy) for training.
• Research and development tax reliefs maintained and over £2 billion in health research and development investment.
• Inheritance tax reliefs maintained for those who choose to leave a gift to charity in their will. Read Remember a Charity's full response to the budget for more information.
• A 1.8% annual real-terms rise for all central government departments through 2029/30. This aims to support public services, including the NHS and schools.

Today’s budget and spending review present a mixed picture for the voluntary sector.

Some measures may help communities, like more local government funding. But new financial pressures could challenge charities.

Increased local government funding

After years of advocacy, we welcome a real increase in local government funding. Voluntary organisations are vital for delivering public services via local government grants and contracts.

They also provide support when public services fall short, often without any public funding at all. This budget signals a shift in government’s approach to funding local public services.

It also aims to simplify local government funding and commits to moving towards multi-year settlements. This will help local authorities and voluntary sector partners to plan better.

Rising operational costs

From April next year, many charities that employ staff will see their costs increase. Some organisations already benefit from Employers' Allowance, which the Chancellor announced will increase from £5,000 to £10,500.

The threshold for claiming Employers’ Allowance will be removed, so more charities may be able to benefit.

The Office for Budget Responsibility estimates that, due to the NICs increase, the average employer will face an extra £26,000 in annual costs (about £800 per employee) when these changes take effect in April 2025.

This added expense will vary widely, so organisations should do their own calculations to understand its impact.

All charities exist to help and support those who need it. So long term investment in services that improve the lives of people is always welcome.

But the ripple effect of years of austerity means many charities themselves are facing uncertain futures. So we'll continue to advocate for the sector, including ahead of the spring spending review.

We have built strong relationships with Treasury officials. We know there are advocates for the voluntary sector within the department.

We're committed to resetting our sector's relationship with government. We're doing this through our work on the Civil Society Covenant with government and ACEVO.

We know that the decisions public bodies make have a huge impact on charities and communities, and that public bodies need a strong relationship with our sector to support communities well.