Five emerging risks facing UK charities in 2025 – and how to prepare

“We didn’t plan to cut services — it just got to the point we had no choice.” 
-Comment from a recently downsized national charity

UK charities are navigating what feels like a pressure cooker: rising costs, shifting regulations and heightened public expectations. If your board or finance team doesn’t have eyes on the horizon, you may already be late to respond.

Here are five emerging risks every UK charity should have front of mind in 2025, with clear and actionable steps to respond.

Energy costs and the new ‘Nuclear Levy’

From November 2025, most charities will face a new nuclear/clean energy levy added to electricity bills. While the average cost may be around £100–£240 per year, energy-intensive charities could see increases of £2,500 or more.

Charities already struggling with inflated energy costs see this as an unwelcome bolt from the blue.

What to do now:

• ask your supplier how this levy will be applied and whether your current contract allows rate adjustments
• run a mini energy audit: even small fixes (LEDs, controls, insulation) deliver returns faster with rising bills
• consider scenario modelling: what if energy costs jump another 20%? Can you absorb, mitigate or negotiate relief from funders?

Tax reform coming in April 2026

A series of tax and compliance changes will come into force from April 2026, and if you think that’s far off, others are already positioning:

• The draft Finance Bill 2025/26 would require all charitable investments (not just the traditional 'type-12' ones) to satisfy a purpose/benefit test.  
• Changes to the tainted charity donations rules could insert an 'outcome test', meaning even well-intentioned donors might be scrutinised more harshly if the outcome is deemed self-benefiting.  
• The concept of ‘attributable income’ is being widened to encompass legacy income, meaning that if you don’t use that money for charitable purposes in a specified timeframe, you might face a tax charge.  

What to do now:

• Undertake an investment review: for every holding, ask “how does this clearly further mission?” Document your logic.
• Stress-test your current fund-management structures: can you unwind or restructure investments if needed?
• Update trustee training: make sure the board understands the new tax and investment rules.
• Monitor HMRC updates: draft bills and consultations are evolving fast.

Financial resilience is still the sector’s core fault line

The Charity Commission’s first annual Sector Risk Assessment flags financial resilience as one of the gravest threats in 2025. Nearly 42.6% of charities reported spending more than their income in their latest returns, drawing on reserves to bridge gaps. 

Some sobering sector trends ratchet the urgency:

• Many agencies are being forced to shut down, merge or scale back services altogether.  
• Charity shops report falling profits due to NIC impacts and squeezed margins.  
• Audit and compliance costs are soaring - surveys show 89% of small charities report rising audit costs, sometimes 25%+ year on year.

What to do now:

• Drill into your financial KPIs: break out scenarios where a major funding stream disappears or income falls 10–20%.
• Revisit your reserves policy: when do you dip, how do you replenish and is this still realistic?
• Engage funders and commissioners early: transparently present your pressures and negotiate cost uplifts or flexibility.
• Look for cost synergies: consolidate overlapping functions, shared back-office services or co-location possibilities.

Employer NIC was the last round - but it’s still biting

The jump in employer National Insurance (to 15% rate with lower threshold) was widely discussed earlier in 2025. Many charities are only now feeling the full shockwave:

• The secondary threshold dropped from £9,100 to £5,000, bringing many part-time and lower-paid staff into scope.  
• The Employment Allowance was increased from £5,000 to £10,500, and the previous cap on eligibility was removed, meaning more charities can benefit.
• Yet in practice, many charity shops say their profits have already shrunk because of this rise.  

So while the increase is not new, the downstream effects continue to reverberate through operations and staffing decisions.

What to do now (even if you’ve already addressed this):

• Re-run your payroll budgets now you have actual 2025 data, not just forecasts.
• Reassess your staffing mix: part-time vs full-time, contracted vs employed, volunteer complements.
• Consider whether productivity, role designs or scheduling can shift to reduce the NIC base (legally and ethically).
• Ensure you’re fully claiming the Employment Allowance, if eligible. Many charities still under-claim.

Trustee skills & reporting: the new demands are non-negotiable

In July 2025, the Charity Commission released updated guidance and a preview of its new SORP accounting framework (set to apply to accounting periods from Jan 2026). And its trustee survey reveals that boards increasingly lack skills in finance, anti-fraud, compliance and risk. 

Add to this:

• Public trust is resilient but fragile - any misstep in reporting or oversight may erode it.
• As reports lengthen and disclosures deepen, many charities struggle to present accessible, intelligible information to stakeholders and beneficiaries.

What to do now:

• Run a skills audit of your trustees: where are the gaps? Where do you most urgently need training or external support?
• Start preparing for the new SORP now: review your leases, revenue recognition, consolidation practices and liaise with your accounting advisers.
• Simplify your reporting for different audiences: donors, commissioners, beneficiaries, so the numbers speak, not confuse.
• Embed dashboard culture: trustees should receive exception reports, trend summaries, and “what keeps me awake” risks, not just balance sheets.

In summary: what you should act on this week

The next step

The next 18 months will be defining for many charities. Those who anticipate change, plan early and invest in governance will come out stronger. Please get in touch with Charles Homan or your usual UHY charity adviser if you require any support regarding the above.