Charities face a payroll crisis. Where is the support?

The recent rise in employer National Insurance Contributions (NICs) is hitting charities hard. Harder, in fact, than almost any other sector.

Unlike a business, a charity cannot pass this cost onto its customers. It cannot raise prices or cut shareholder dividends.

Every extra penny spent on tax is a penny taken away from helping people. And yet, despite the House of Lords proposing a sensible exemption for small charities, the House of Commons voted it down.

This is a tax rise that charities never budgeted for. And for many, it could not have come at a worse time.

Employer NIC increases have piled on the pressure

According to Howden’s Rewarding Industries 2025 report, over half of UK charities say they are now at risk of closure. The rise in employer NICs from 13.8 to 15 per cent is the biggest single contributor.

Even the smallest charities (those with turnover under £1 million) are being dragged into this. While the Government points to the increased Employment Allowance as a form of relief, it barely scratches the surface for organisations with tight margins and high wage costs.

What makes this particularly frustrating is that many of the services charities provide are those the Government itself relies on, such as running food banks or helping those affected by domestic abuse.

There is a clear tension in taxing organisations that provide services the Government itself depends upon.

How charities can start making sense of the numbers

There is no quick fix for this tax increase, but you can take steps to understand the impact and protect your charity’s finances.

• Work out your new NIC bill for the whole year. Do the sums now so you are not caught off guard later in the financial year.
• Claim the £10,500 Employment Allowance. This will help reduce your bill, but for many charities it will only cover part of the increase.
• Plan for cost and income shocks. What would you do if demand for your services suddenly rises this winter, or a core funder pulls out? Having a plan gives you options.
• Review your income streams. If fundraising is falling short, could corporate support, grant funding or partnerships help fill the gap?

No charity can avoid this change, but you can face it with your eyes open and a clear plan in place.

Recognised for your impact, penalised on your payroll

The Government talks about charities being part of the social fabric. Yet its tax policies treat them like any other employer.

That contradiction needs challenging, and while we cannot change the law overnight, we can help you manage it.

Charities are here to make a difference, but right now, they are being asked to do more with less.

If you are worried about how the increase to employers' National Insurance will affect the long-term future of charity, speak with our team today.

Fiona Westwood