Six ways the 2025 Budget could impact your church or charity

After many weeks of speculation, the Budget was delivered on 26 November 2025. Amongst headline measures such as the scrapping of the two-child benefit cap and a pay per mile charge for electric vehicles, there were various announcements which could impact your church or charity.

1. Your staff may be entitled to increased wages from 1 April 2026

The National Living Wage for those aged 21 and over will increase by 50p an hour to £12.71.  The National Minimum Wage for those aged 18 to 20 will increase by 85p an hour to £10.85. The rate for 16 and 17 year olds will increase by 45p an hour to £8.

You need to ensure that the salary paid, together with all of the hours worked by an employee (including volunteer hours worked in the employed role), meet the requirement for the National Living or Minimum Wage, otherwise your reputation could be put at risk by being named and shamed by HMRC and you may incur heavy penalties (the maximum fine is currently £20,000 per worker).

2. Your staff may pay more Income Tax thanks to frozen bands

The Income Tax personal allowance of £12,570 and the higher rate threshold of £50,270 (above which the 40% rate applies) have been frozen since April 2021.  This freeze was already due to continue until April 2028 and has now been extended to April 2031.  When wages go up with inflation, but tax bands don’t increase, ‘fiscal drag’ creates a hidden tax rise, with more people having to pay Income Tax and more paying the higher or additional rate.

The Office for Budget Responsibility (OBR) estimates that during the freeze, 5.2 million additional individuals will be brought into paying Income Tax and 4.8 million more will have moved to the higher rate.

This change is particularly likely to be felt by staff currently earning a little below the £50,270 threshold, who may find that wage growth over time leads to a smaller than expected increase in their take-home pay as they start paying Income Tax at 40%.

(Please note that different tax rates apply in Scotland - read more.)

3. Your staff might make more salary sacrifice pension contributions before April 2029

If you offer a ‘salary sacrifice’ scheme, your employees can ‘give up’ some of their salary in return for additional pension contributions. This effectively means the pension contributions are free of National Insurance and Income Tax.

From April 2029, the National Insurance relief is being capped. If an employee sacrifices more than £2,000 per year into their pension, they will pay National Insurance (but not Income Tax) on the excess amount.

Some of your staff may wish to make extra salary sacrifice pension contributions before April 2029, in order to take advantage of full National Insurance relief before the cap is brought in.

4. Raise more funds by helping higher rate donors make their personal Gift Aid reclaim

Donors who pay Income Tax at the higher (40%) or additional (45%) rates can make a personal tax reclaim in addition to the amount your charity reclaims via the donor’s Gift Aid declaration.  Many donors are unaware of this opportunity and so by raising awareness you can help your donors to afford to give even more to your cause.

The OBR estimates that, thanks to the extension of the tax band freeze, almost one in four taxpayers will be paying at the higher or additional rate by 2031.  This means that a significant proportion of your donors are probably missing out on personal tax relief which could enable them to be more generous.  By informing your donors about how to claim personal tax relief, your church or charity could raise more funds.

5. Invite giving of property and shares

Higher tax rates will apply to dividend income from 6 April 2026 and to property income from 6 April 2027.  This may encourage donors to consider gifting property or shares.  Our blog about non-cash giving explains the existing Capital Gains Tax exemption and Income Tax relief which apply to these charitable gifts.

Stewardship can partner with you to facilitate a donor’s gift of property or shares and then grant the proceeds to you at the donor’s request.

6. Businesses will be incentivised to donate surplus goods from 1 April 2026

If a business donates goods to a registered charity for onward distribution to beneficiaries or for use in delivering the charity’s services, the business will no longer have to account for VAT.  This will incentivise businesses to donate surplus goods (such as food, furniture or technology) rather than disposing of them.

Whether you’re looking for new office equipment or seeking to provide essentials to people living in poverty, you could contact local companies and business networks to make sure they are aware of the upcoming change and find out whether they may be willing to support your cause in this way.