The not-for-profit (NfP) sector is facing growing demand for support as funding and cost pressures stretch their capacity. With lots of small changes buried in the detail, the Budget’s impact will vary with each organisation’s workforce and activities. For trustees, the priority is to assess what this Budget means for cash flow and the resources available for frontline services.

Top tax changes for charities and not-for-profits

Higher minimum wage rates increase employment costs

From April 2027, the national living wage will rise by 3.9% to £13.21 an hour, alongside increases to other minimum wage rates. Many NfP organisations already struggle to meet rising employment costs, so this will place further pressure on budgets and frontline services. Apprenticeship and youth employment incentives may provide some limited support.

Employer sponsorship costs for charities and NfPs

From 28 October 2026, employer-paid sponsorship fees for skilled workers will be exempt from income tax. This allows NfPs, particularly those recruiting overseas workers in health and social care, to meet these costs without creating a tax liability for the employee.

Mileage rates changes from April 2027

From April 2027, the tax-free mileage rate above 10k miles will rise to 35p per mile. Those with mobile workforces will welcome this benefit extension.

Business rates support for community organisations

Business rates measures include additional relief for social clubs and qualifying retail, hospitality, and leisure properties, alongside £65m to rescue and refurbish at-risk community buildings. NfPs who do not currently get rates relief, may now be more protected and help improve valued community facilities, including sports clubs and community-owned venues.

Changes for social housing

From 1 April 2027, land purchased by relevant housing associations will qualify for a new VAT zero rate, with a further £1.5bn allocated for around 10k social homes. A welcome, if already expected, measure means reducing some development costs for housing associations and other qualifying providers.

Investment and property changes

The main pool writing-down allowance for taxable activities and trading subsidiaries will reduce to 12%. A new 50% first-year allowance available for some expenditure outside full expensing. NfPs and their trading subsidiaries planning significant capital expenditure may need to revisit investment appraisals and the timing of expenditure.

Energy VAT rates cut extended for charities

The temporary 0% VAT rate for qualifying domestic electricity supplies will be extended to 1 July 2027. This includes supplies that previously qualified for the reduced rate because of certain charitable non-business use. Affected charities should benefit from lower irrecoverable VAT costs, although the extension is temporary and should not be built into longer-term budgets.

VAT changes for locum doctors from May 2027

From 1 May 2027, supplies of locum doctors will become subject to 20% VAT following the removal of the staffing exemption. This could create a significant additional cost for affected healthcare charities and other providers that cannot fully recover VAT.

VAT zero rating for donated medicines

Medicines supplied free of charge for qualifying purposes will be zero-rated (backdated) from 23 June 2026. This includes medicines used for early access arrangements, clinical trials, and continued treatment following a clinical trial. A fix for a known issue which was causing threat of a supply withdrawal by the pharmaceutical industry.

HMRC increases tax compliance focus on not for profits

HMRC is increasing its focus on tax compliance and debt recovery, including new powers where taxpayers repeatedly fail to engage on lower value debts. In other similar initiatives, we have seen HMRC target NfPs with more complex tax profiles. We await further detail.

To discuss what the Autumn Budget means for your not-for-profit organisation, please contact your usual RSM adviser.