Blog

Financial sustainability Charity finance policy Tax and VAT

17 November 2017, 09:43

What should charities expect from the Autumn Budget 2017?

It’s that time of the year again when the newspapers are full of gossip about potential giveaways or shocking tax changes which are going to cost eye-watering sums of money. ...

Post byAndrew O'Brien

Where next?

Events »

Tuesday, 26 January 2021
Advanced Investment Training Series More »

News »

Monday, 18 January 2021
Charity sector calls for emergency support package More »

It’s that time of the year again when the newspapers are full of gossip about potential giveaways or shocking tax changes which are going to cost eye-watering sums of money. Over recent years, charities have got used to Budgets being “missed opportunities” and passing by without much of an impact. But we cannot be complacent as charities. Tax reliefs for charities are worth billions every year and over 1/3 of our income comes from government. Simply put, what the Chancellor says matters. So what we can expect from the Autumn Budget?

Tax increases likely

The Chancellor is under pressure to fund various initiatives. He has also committed himself to eliminating the deficit by 2025, and he doesn’t look likely to back track on that. The biggest story of the day will probably be the Office for Budget Responsibility’s forecast on how quickly the economy will grow in the years ahead. If poor productivity and Brexit are deemed to have damaged long term growth, the Chancellor may lose the headroom he had previously built into his previous Budgets. All this means that attention will turn on revenue raising. One area where the government has already showed an interest in increasing revenues is the Insurance Premium Tax. This has doubled in recent years and is now costing charities an extra £25m a year. The Chancellor has said that he wants to bring IPT in line with VAT rates which would mean increasing it from 12.5% to 20%. This would add an extra £20m to the bill. Overall, this would leave charities paying around £80m a year in IPT. This is going to particularly impact the smallest charities who generally pay a greater proportion of their income on insurance than the largest charities. It is also a cost that few can avoid because insurance is usually required by law or regulation. In recent days there has even been a story flying around that income tax may be increased in order to pay for public services. I find this hard to believe, but if it was to increase this could be good and bad for the sector. Good in one sense because the value of Gift Aid repayments would increase. Bad for charities, because it could put pressure on donors and increase wage demands from staff. Another charity specific measure that could be announced is changes to the Gift Aid Donor Benefit rules. The government ran a consultation some time ago on changes to help the charity sector, and so far there has been radio silence from government. Perhaps the Red Book will include some further information on this? All parties promised to review the business rates system (again) at the last General Election. A review into VAT reliefs has recently been proposed by the Office of Tax Simplification, but could we see another review into business rates announced? This would certainly appease the business lobby. For charities, it could be good or bad. Leaning to the positive side, as the case for protecting charity rate relief has only been recently accepted by government, could this be a chance to finally get 100% business rate relief for charities?

The end of austerity?

After the election, I wrote for the CFG blog that we may be seeing the end of austerity. All the political parties had to some extent committed to more public spending in the election campaigns. In the Conservative Party, the consensus appears to be that the public had enough of cuts and pay restraint. It seems inevitable that this Budget will see a loosening of purse strings for areas such as social care, housing and the NHS. For charities working in these sectors, this will be a welcome relief. However, the key issue for most charities is what happens to local authority spending. On housing, there appears to be a consensus that borrowing caps should be loosened for local authorities. But on day to day spending, the picture appears bleak. More funding for social care would certainly help local authorities, with the LGA estimating that there will be a £5.8bn overall funding gap for councils by 2019/20. Will government give councils the chance to raise council tax to close this gap and ease the cuts? Although not directly relevant for charities, changes to public sector pay will have an impact on the sector. Many charities are competing with the public sector for staff and awards to their staff will have an impact on pay settlements in the charity sector. One of the few areas of expenditure which haven’t risen significantly in recent years has been pay, so a return to “normal” levels of pay increases could add further pressure to charity budgets.

Keep informed

Whatever happens on the day, you can follow analysis of the Budget via Charity Finance Group’s Live Blog and the twitter hashtag #charitybudget. CFG will also be producing a free briefing for charities on the Budget, which will be available on Wednesday evening. Â« Back to all blog posts

Blog

What should charities expect from the Autumn Budget 2017?

Tax increases likely

The end of austerity?

Keep informed

Related Content

Finance Focus October 2020

Finance Focus September

Summer Economic Update

Live Blog: Autumn Budget 2017

IFS 2017 Green Budget – the good, the bad, and the worrying?

EU Referendum: What could this mean for charities?

Hunting for the silver lining; the IFS, the economy and charities.

Tackling some myths on the Spending Review

Financial sustainability won’t be easy for the charity sector

Welfare and employment dominate the Budget: What does this mean for charities?

Budget 2015 – Missed opportunities and targeted giveaways

Vision for sector post-2015. What did the politicians have to say at the CFG Annual Conferece?

Managing in a Downturn Report Reflections....

And then the world turned upside down…

Finance Focus November/December 2020

Bespoke interventions for the sector are never more needed

Collapse in charity provision looms at moment of greatest need

Finance Focus August

Finance Focus July

From red to green, but what does it mean for us?

What does the chancellor’s announcement mean for charities?

Sector bodies issue joint proposal for Chancellor ahead of March's Budget

Five takeaways from August’s Inflation Report

The Charity Tax Commission report - does it go far enough?

Economic Outlook Briefing 2019/20

Charity Property Matters Survey 2018

Economic Outlook Briefing 2018

Charities need to find nearly £4bn additional income by 2020 finds CFG

Government no longer has the luxury of ignoring charities

Could political instability create financial instability for charities?

NCVO Almanac points to fundamental shifts in the charity operating environment

Common Gift Aid Questions Answered by HMRC

Better partnerships needed between finance and fundraising teams

Live Blog: Spring Budget 2017

Three things for charities to consider in the wake of Trump victory

Saying what we want: Devolution & Voluntary Sector Summit

Tony Armstrong looks at Devolution: working with local organisations to transform public services

Devolution is our chance to advocate for the most vulnerable

How will the 'devolution revolution' be financed?

Caron asks: 'Why does the voluntary sector need a devolution summit?'

Post-Brexit Autumn Statement is first key battleground

EU Referendum: Keep watching this space…

A ‘straightjacket’ Budget: Pay, Tax Avoidance, Welfare and Assets

What did the Romans ever know about data protection?

What’s in local government’s Christmas stocking?

Gift Aid Small Donations Scheme: Is it really working for charities?

What do charities need to know about the Spending Review?

Public benefit is at the core of both charities and the tax system

Some lessons from HMRC's Higher Rate Gift Aid Donors report

#volsecbudget 2015 - CFG Live Blog

What can charities expect from Wednesday's Budget? #VolSecBudget

Gift Aid could be the key to encouraging a culture of giving

#volsecbudget – What should charities look out for?

Fog of uncertainty makes post-election planning difficult for charities

2014, politics, and charities

Business rate relief for charity shops in Wales: why it matters elsewhere too

Delayed reaction: what difference do Budget measures make to charities?

CFG reiterates call for fit-for-purpose CJRS

Charity sector calls for emergency support package

Media release: Charity sector innovation boom set to last beyond pandemic

We will keep “raising the alarm”

Tessy Ojo CBE kicks off CFG's Annual Conference 2020

The balance between giving and receiving: Why CFG is (temporarily) closing in mid-December

What does the Spending Review mean for charities?

CFG gives small charities a boost with launch of new bursary scheme

CFG's initial comment on the government's Spending Review

This is an emergency! CFG asks civil society to #MobiliseNotMothball and get behind its urgent message to government

Civil society urges Chancellor to urgently make job scheme fit for purpose

Coronavirus Job Retention Scheme extended into the spring

The boy who cried wolf

Press release: Charities fear Christmas cash crisis

Three-year Comprehensive Spending Review replaced

CFG responds to news of charity sector redundancies

When is a furlough not a furlough?