The Chancellor of the Exchequer presented his Spring Budget to Parliament on Wednesday 6 March 2024 and it is his chance to update parliament and the UK public on the Government’s economic plans.
The plans are based on economic forecasts made by the Office for Budget Responsibility (OBR), which are made twice a year and help the UK Government know whether it will meet its own financial targets and what it can spend money on, and whether it needs to adjust taxes or borrowing to pay for it.
The Chancellor used the budget opportunity to set the stage for the forthcoming general election and to try and influence voters. He announced some major tax and spending plans and the finer details of the budget did contain some positives for the charity and not-for-profit sector.
Full details of the budget can be obtained from the GOV.UK website here. Below, we set out some of the areas that will impact UK charities.
The UK has been through a decade of public service spending cuts, a pandemic and now is in the middle of a cost-of-living crisis so the charity sector was eager to see what the budget would include to help alleviate the pressures on charities and those that need their shrinking resources.
Key Budget announcements for the charity sector
Below is a summary of the key budget announcements that will directly or indirectly impact the charity sector:
- Reduction of NIC rates – this helps charities from a gift aid point of view as opposed to income tax rate reductions as it preserves the rate of income tax that charities can reclaim via gift aid.
- The VAT registration threshold will increase from £85,000 to £90,000. A modest increase that will help charities especially with recent inflation levels, however it will not make a significant difference.
- Gift Aid legislation - The government confirmed that gift aid legislation would be amended to prevent unintended adverse consequences arising from the new Digital Markets, Competition and Consumers Bill (which brings in protections for customers taking out digital subscriptions), so charities can continue to claim gift aid as before.
- Extension of the 6 week reset period for empty property business rates relief to 13 weeks to counter abuse (so a property has to have been occupied for longer before qualifying for empty property relief), but didn’t go forward with more drastic proposals such as abolishing the next-in-use relief for charities (which benefit from longer empty property relief, as long as the next intended use is likely to be charitable).
- Investment in early career research in medical charities of £45m, this will benefit medical research into diseases such as dementia, cancer and epilepsy.
- Debt Relief Orders scrapped - The £90 fee for Debt Relief Orders (DROs) will be scrapped from 6 April, which will help debt advice charities and their beneficiaries who want to use a DRO as a debt solution. Also, the debt threshold for DROs will increase to £50,000 from 28 June. These changes will provide some assistance to people under the burden of debt and help offer a route to a fresh start.
- Extension of the Household Support Fund - due to end in March 2024, the Household Support Fund will be extended until the end of September. The Chancellor committed another £500m to ensure this fund can continue to support those who need it. While it was not the 2 years that was being sought this will go some way to helping to reduce demand that some charities provide. There remains concern about the impact the removal of the fund when it ends in September.
- The Universal Credit loan advance repayment period will increase to 24 months for new loans taken out from December 2024 by Universal Credit claimants. While helpful as it will decrease monthly payments, it is only for new loans taken out from December 2024 and so with no immediate support.
- Funding for nurseries and preschools will rise with inflation as more places are made available in order to enable more parents to take up the funded 30 hours of childcare.
- Not-for-profit creative industries with existing tax reliefs for theatres, orchestras, galleries and museums are set to continue with the 45% tax relief for orchestral performances being made permanent and £26m of funding for The National Theatre to upgrade its stages.
- Child benefit changes to remove the inequalities and ‘unfairness’ in the current system. The limit on eligibility for full Child Benefit will be increased in April 2024 from £50,000 to £60,000 for the highest-earning parent. Currently, if the highest-earning parent in a household earns over £50,000, only partial Child Benefit will be paid. The changes are aimed at reducing unfairness and moving to a system based on household rather than individual incomes by April 2026. This follows extensive campaigning from some charities and from Money Saving Expert and its founder Martin Lewis. Further details can be found here.
Limitations for charity and not-for-profits
The budget does not contain significant benefits for the charity sector or for the main beneficiaries of the sector. The support for struggling households doesn’t go far enough and missed opportunities include:
- Income Tax thresholds have remained where they are, meaning with recent inflation effects many households will be dragged into higher tax brackets or start paying tax which may cancel out the NIC reductions.
- There was no comment on an ‘Essential Guarantee’ to support people receiving benefits and to hep ensure the universal credit covers essentials such as food, bills and essential travel costs. Several charity organisations have been calling for the Guarantee to protect people from going without essentials.
- Streamlining and reviewing the tax system for charities, such as the gift aid system and charity rate reliefs and VAT relief as charities face disadvantages compared to companies in recouping the VAT that they pay on expenditure. The Charity Tax Group has set out how charities face an array of tax law complexities that they have to contend with: Charity Tax Group Budget Submission 2024
The next step
If you have any questions regarding the above, please contact Colin Wright on c.wright@uhy-uk.com, or your usual UHY adviser.
