Article last updated 29 October 2026.
This Budget marks our eighth chancellor in ten years. Polls suggested Chancellor John Healey was likely to adopt low-cost, voter-friendly policies, such as support for pubs and money towards energy bills, while avoiding more significant, potentially controversial policies. The Chancellor inherited strict fiscal commitments from his predecessor, which he has publicly endorsed. Commitments that were approved by the IMF and the bond market. However, we remain in a cost-of-living crisis, so will the self-titled “breathing space” measures really move the dial? Charities continue to face rising employment costs, growing demand for services, and pressure on both public funding and charitable giving.
The 2024 Budget saw increased employer National Insurance Contributions (NICs) and lowered the threshold at which employers start paying them. NCVO estimated that the changes would add around £1.4 billion a year to charity sector costs. The impact of these changes is now visible across the sector. The National Trust announced plans to reduce its workforce by around 6%, as part of efforts to make substantial annual savings. It saw overall expenditure rise by 3% last year, including spending £17.8m on redundancies.
The key question for charities will be whether today's measures help or hinder. A Charity Finance Group survey illustrates the challenge: 69% of respondents said their charity had already begun reducing headcount or expected to do so in the near term, while 41% had cancelled plans to recruit staff or launch new services following the employer National Insurance increase.
What did the 2026 Budget change?
The Chancellor left the key main rates of income tax, National Insurance and VAT unchanged, as expected, with no change to the 2024 employer NIC increase. The National Living Wage will rise by 3.9% to £13.21 an hour from 1 April 2027. For charities with large numbers of lower-paid employees, payroll pressures are likely to persist.
Income is under pressure, too. The Charities Aid Foundation estimates that the British public donated £14 billion in 2025, down from £15.4 billion in 2024, and reports that approximately six million fewer people give to charity than a decade ago. Measures affecting household disposable income, therefore, matter to the sector just as much as those directly targeting charities.
There were no announced changes to Gift Aid or the inheritance-tax incentives for charitable legacies, so the existing framework remains in place. There is some help with operating costs: the 55p tax-free mileage rate for the first 10,000 business miles will be made permanent, and the rate thereafter will rise from 25p to 35p from April 2027. The Treasury specifically identifies care workers and social workers among those likely to benefit.
Parts of the sector will welcome more targeted support. The Budget provides additional funding to address rough sleeping, alongside £1.5 billion to deliver social and affordable homes in England. It also prioritises support for the Violence Against Women and Girls strategy.
Devolution continues to be a theme for this Government, with a £1.5 billion borrowing facility for Mayoral Strategic Authorities from April 2028. For charities delivering locally commissioned services, community foundations and other place-based funders, the continued shift towards devolved decision-making may prove as significant over time as some of the headline national announcements.
The Budget also expands support for Community Development Finance Institutions, building on existing backing for impact lenders, including Social Investment Scotland. Together with the role envisaged for the Office for the Impact Economy, these measures suggest a continued policy focus on how private, philanthropic and impact capital can complement conventional public funding.
Resilience remains key
Overall, this is a mixed Budget for charities. It contains meaningful, targeted support for organisations working in housing, homelessness, women and girls, early intervention and local regeneration, but little direct relief for the sector as a whole. The continued rise in employment costs will remain difficult for organisations already reducing headcount or delaying services.
Whatever the immediate verdict, the experience of recent years demonstrates how quickly changes in taxation, wages, funding and household finances can affect charities.
For trustees, this makes financial resilience increasingly important. That means understanding future spending requirements, holding appropriate reserves and ensuring that longer-term assets are invested in ways that reflect the charity's objectives and time horizon.