UK Autumn Budget 2025: What it means for charities

Jeffrey Ball
Director, Wealth Manager – Charities
RBC Brewin Dolphin

The Budget is a stone. What waves will hit the charity shoreline?

Rachel Reeves did not drop a pebble. She cast a stone that sent multiple waves towards the charity sector. Some will break now, while others will roll in over the coming months and years. For the sector, it reshapes payroll, commissioning, and service demand; for the charity investor, it redefines liquidity, diversification, and governance risk.

Here’s what trustees need to know – and how to prepare.

The end of the two-child benefit cap

From April 2026, the two‑child benefit cap will be removed in full. The government estimates this will lift around 450,000 children out of poverty by 2030.³ For the sector, this greater support for families is a win following years of campaigning.

Winter fuel payments

This was another political pinch point. The reinstated Winter Fuel Payment will provide £100 to £300 to households with an annual income up to £35,000, vital for preventing pensioner poverty and excess winter deaths¹. However, energy bills remain high for charities themselves – a lack of comment on energy and digital resilience support were glaring omissions – leaving trustees welcoming the relief for beneficiaries, while reviewing their own exposure to rising costs.

Payroll pressures: The first wave

From April 2026, the freeze on National Insurance (NI) thresholds until 2031 will begin to bite. It isn’t a headline rate rise, but a subtler drag that means every pay increase intended to retain staff simply pulls more of the wage bill cost into the NI column.

For the majority of small charities, this will barely register – most are volunteer run and have no paid staff. But for medium and large service delivery organisations, the effect is sharper. Payroll typically accounts for a larger chunk of expenditure than in the private sector, so even a modest 3% to 5% rise could translate into tens or hundreds of thousands of pounds annually. This comes a year after everyone winced at the elevated National Insurance Contribution (NIC) decision announced in the 2024 Autumn Budget. Cries for sector exemptions remained unanswered.

This also means that staff who previously sat below the threshold now trigger NIC payments. Add to this a 4.1% increase to the National minimum Wage from April 2026, and this further elevates costs in a sector that typically utilises lower paid and part-time employees. It won’t be begrudged on a fundamental level as this will also reduce in-work poverty, but individual organisations will still have to find yet more funding to cover these costs.

Overall, this will be the wave that hits first, and hardest. Like last year, the timing mismatch is stark: costs will rise from April, while income from contracts or donors will lag over years. As then, boards that reforecast payroll now, model different pay rise scenarios, and prepare evidence for renegotiating contracts will be better placed to withstand the surge.

Commissioning: Slowly eroding the cliff face

The second wave is slower, but no less damaging. Councils’ core spending power is set to rise by around 3% to 4% in real terms² between 2025 and 2028, albeit with swinging differences across the country. Yet inflation, social care pressures, and demographic change mean this uplift will be absorbed quickly. That leaves little headroom to expand contracts that had been steadily shrinking for years.

One glimmer of positivity is that from 2028-29, the government will centrally fund the full cost of the Special Educational Needs and Disabilities (SEND) provision², shifting the burden away from councils. For the sector, this promises more predictable funding for charities supporting people with additional needs, which has become one of the fastest-rising costs for local authorities.

Despite this, it’s still likely that overall margins will continue to erode. The charities that cope best will be those that walk into commissioning conversations with the best evidence of impact and clear options for redesign, which is easier said than done. But without this, erosion will be silent and relentless.

Liquidity: The market tide

The Office for Budget Responsibility (OBR)’s November 2025 outlook downgraded gross domestic product (GDP) growth to 1.4% in 2026.⁴ Now, slower growth and high public debt isn’t new, but a seeming lack of ideas about growth from the Labour government could dent UK economic sentiment. However, for charities with globally diversified portfolios across different regions and asset classes, the UK economy isn’t a driving factor, which means this impact will be diluted. Instead, what’s more important for charities with reserves is whether boards have confidence in their accessible short-term reserves.

Liquidity is the ability to adapt and to release cash when needed. Trustees should ask whether they have enough readily available reserves to cover a period of volatility, and whether their investment policy gives them confidence to act decisively when markets shift. The last thing we want to do is liquidate funds in a time of market stress. There’s plenty going on in the world currently beyond the UK. Those rainy-day funds matter.

Donors and corporates: The delayed wave

The Budget introduced £26 billion of tax rises, including a mansion tax on properties over £2 million and the removal of NI relief on salary sacrificed pension contributions above £2,000 (from April 2029). These measures alter household and corporate finances. This means donors will take time to adjust their giving, and corporate partners will look harder at the value of partnerships. It’s hard to quantify today but further squeezes feel inevitable.

Unrestricted income – the lifeblood of many charities – will remain fragile. The charities that cope best will be those that keep their fundraising mix broad and their case for support clear. Investment income remains a fairly steady additional income stream.

Charity Commission funding: A lighthouse?

The Charity Commission’s budget rose by over 25% to £37.9 million for the 2025/26 tax year. More funding should mean more staff, more capacity, and – hopefully – more support available through clearer guidance, faster responses, and more proactive engagement with boards. 

This is an opportunity for trustees. Stronger Commission capacity could mean better advice on governance standards, risk management, and compliance. Documentation is not bureaucracy, it’s protection. Policies need to be living documents, not simply ticked boxes. Fingers crossed there’ll be more support to help make this a reality.

A few sheltered coves in shifting waters

The Budget sets down some steady markers: benefit reform that lifts families out of poverty; winter fuel relief that eases hardship; a minimum wage uplift that reduces in-work poverty; SEND centralisation that promises stability; inheritance tax relief that protects gifts; and regulatory investment that strengthens governance.

But these sheltered coves don’t offer safety. The combined forces of rising payroll costs, local government uplifts barely lifting, and the age-old story of trying to do more for less in the face of increasingly tax-burdened donors and cash-strapped commissioners, means this Budget sets a course that will need a steady hand to navigate.

Trustee actions at a glance

Charity sector:

• Reforecast payroll now, modelling different pay rise scenarios and NIC exposure.
• Prepare evidence to demonstrate impact or adjustments to commissioners.
• Budget for energy and digital resilience costs.

Charity investors:

• Review reserve and investment policies to ensure liquidity.
• Diversify portfolios to balance potential bond yield volatility with equity and alternative exposure.
• Use Charity Commission guidance to tighten governance and compliance.

How RBC Brewin Dolphin can help

We work with charities across the UK to provide clarity, confidence, and practical solutions on: 

• Investment management: building portfolios that balance income, growth, and risk, aligned with your mission
• Liquidity planning: ensuring reserves are accessible when needed, without forced sales in volatile markets
• Governance support: helping trustees document decisions, strengthen compliance, and meet regulatory expectations
• Sector insight: combining financial analysis with deep understanding of charity operations and trustee responsibilities

Whatever your priorities, contact us today to navigate these changes and build resilience into your strategy.

+44 (0)20 3201 3900 
charities@brewin.co.uk
www.rbcwealthmanagement.com/en-uk/charities

References

1. Age UK, impact assessment of government decision to means test winter fuel payment .
   https://www.ageuk.org.uk/siteassets/documents/reports-and-publications/evaluation-reports/age-uks-equality-impact-assessment-of-the-governments-decision-to-means-test-winter-fuel-payments.pdf
   
2. HM Treasury, Budget 2025 Report (HC 1492) 
   https://www.gov.uk/government/publications/budget-2025-document 
   
3. Department for Work & Pensions, Removing the two‑child limit on Universal Credit: Impact on low income poverty levels in the United Kingdom 
   https://www.gov.uk/government/publications/poverty-impacts-of-social-security-changes-at-budget-2025/removing-the-two-child-limit-on-universal-credit-impact-on-low-income-poverty-levels-in-the-united-kingdom 
   
4. Office for Budget Responsibility, Economic and Fiscal Outlook, November 2025 (CP 1439) 
   https://obr.uk/docs/dlmuploads/OBREconomicandfiscaloutlookNovember_2025.pdf 
   
5. House of Commons Library, Autumn Budget 2025: Background briefing (CBP‑10400) 
   https://commonslibrary.parliament.uk/research-briefings/cbp-10400/ 
   
6. HM Revenue & Customs, Budget 2025 tax related documents 
   https://www.gov.uk/government/collections/budget-2025-tax-related-documents 

The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. You should always check the tax implications with an accountant or tax specialist. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

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