Employers' National Insurance Contributions (NICs) are set to increase from 13.8% to 15% in April 2025. This upcoming change has become a major point on concern for many charitable organisations across England and Wales – organisation operating in a sector that is already grappling with several financial challenges.
What is changing?
From April 2025, employers' NICs will rise by 1.2%, from 13.8% to 15%. While public sector bodies, such as the NHS are set to receive exemptions or subsidies from the government to offset the increasing costs, charitable organisation are not being similarly protected by the government. This places charities in the precarious position of facing increased operational costs, without receiving equivalent financial support.
What does this mean in practice?
For charitable organisations with a large number of staff, the NIC increase represents a significant additional expense. The additional cost is likely to force charities to make difficult decisions, including cutting back on staff, scaling down services, or delaying planned projects. For instance, several hospice charities claimed that following the rise in NIC, they will have to cut down on the number of patients they can care for.
Unfair treatment of charities?
The fact that public sector organisations are being supported through this change while third-sector organisations are not is a source of frustration for many charities. The work charitable organisations carry out often times can be seen as complementary to public sector services, such as providing social care, housing, or mental health support. Yet, although many charitable organisations will be severely impacted by the change, they remain excluded from measures designed to protect public sector organisations.
Hundreds of charities have signed an open letter addressed to the Treasury – they are calling for fairness, arguing that their contribution to society deserves due recognition and financial support from the government. Charities have highlighted that the struggle they will face due to the increase in NIC is particularly concerning given that the demand for charitable services has risen significantly in recent years, especially following the cost-of-living crisis. Notwithstanding the lobbying efforts of the third sector, the government - at least for now - has ruled out any possibility of providing NIC exemptions for charitable organisations.
Ensuring that charities can weather financial difficulties and that they can continue to operate uninterrupted is not only in the interest of the beneficiaries of these charities, it is in the interest of society as a whole.
For further information or support please get in touch with Khalid Sofi or Anna Rátkai from our Charities team, or your usual contact in our firm, and we will be able to assist you.