The Chancellor presented the Autumn 2025 budget yesterday after weeks of speculation, and many of the announced changes were in line with expectations. Some of the key items that may affect charities are noted below:
VAT
From April 2026, where a charity receives donated goods to distribute to their beneficiaries, or to use themselves in the course of running the charity, this donation will be zero rated for VAT if the charity is registered.
Although there is limited information at this stage, it seems that the individual costs of these items will be capped at £100. There will also be a specific list of “high value essential” items which will be capped at £200. This includes items like laptops and white goods.
This will only apply for registered charities, so CICs will be excluded.
The government has also committed to a consultation to introduce VAT reforms around the development of land for social housing, in an attempt to stimulate building.
Compliance
The government intends to introduce new charity legislation which will tighten up rules around approved investments and non-charitable expenditure. They will also introduce legislation to address “tainted donations”, where a donor has made a donation purely to obtain some financial benefit from the charity. These changes will apply from April 2026.
From April 2026, the late filing penalties for corporation tax will double.
Payroll Taxes
There are some minor changes due to payroll taxes, including:
- Freezing personal allowance thresholds for another three years until 2031
- Increasing the tax rate on property and savings income by 2% to 22% (and 42% and 47% for higher and additional rate tax payers respectively)
- Increasing the tax rate on dividend income by 2% to 10.75% (and 35.75% for higher rate tax payers. The additional rate remains unchanged at 39.35%.)
- Capping the NICs relief that can be obtained through salary sacrifice at £2,000 from April 2029
- Increasing the National Living Wage to £12.71 from April 2026
Other Taxes
Other changes which could affect clients:
- Proposed reforms to the R&D system including:
- An Advanced Assurance Service to allow organisations to confirm their eligibility before they submit their R&D claims
- Changes to treatment of intra-group payments for certain surrendered R&D and Creative Industry Credits
- Lower business rates for retail, hospitality and leisure
- Charity exemptions for IHT purposes will apply only to direct gifts to registered UK charities and clubs, with changes effective for lifetime gifts from 26 November 2025 and gifts on death from 6 April 2026.
- The First Year Allowance of 100% for qualifying spend on zero emission cars and electric vehicles has been extended to 31 March 2027
- A new 40% First Year Allowance will be introduced from 1 January 2026 for certain assets, such as those bought for leasing.
- The main rate for Writing Down Allowances will drop to 14% from April 2026
About the Author
Liv Burrell
Audit Director
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