The 2026 Budget speech, as anticipated, did not contain any fundamental changes to charity tax reliefs. However, it contained a number of more detailed tax and fiscal measures that charities will need to be aware of in the coming months. We have outlined some of these below; as always, the devil will be in the detail, and we will report on these over the coming weeks as more information becomes available.
The Budget’s theme was “Breathing Space for Today, Fresh Hope for the Future” focused on easing financial pressure on households at a time of economic uncertainty. Whilst many of the changes are not charity specific, they may have implications for charities, beneficiaries and the wider operating environment for the sector.
Key announcements include:
- A permanent increase of the mileage rate that can be paid tax free to employees of 55p per mile for the first 10,000 miles introduced from April 2026, coupled with an increase in the rate payable for mileage in excess of this from 25p to 35p from April 2027.
- An increase in the National Minimum and National Living Wage by 3.9% to £11.27 and £13.21 respectively.
These measures may also have an impact on the costs for charity employers, particularly those who reimburse expenses for volunteers and staff. Other announcements that may impact charities in different ways, but are less likely to make the headlines, are:
VAT and indirect taxes
- The extension to the zero rate of VAT for domestic electricity, which we covered in our July 2026 briefing on the implications for charities.
- The proposal to extend the requirement for online marketplaces to collect VAT on sales for UK VAT registered businesses with a turnover on an individual platform of over £90,000.
- Proposed changes to cross border services and the requirements for non-registered VAT businesses to account for the reverse charge from October 2027. The reverse charge can result in charities needing to register for VAT simply because they are buying services from overseas and are subject to the reverse charge. Again, we will be considering the detail and impact of this in the coming months.
- A new VAT relief for land sold to registered social housing providers to help unlock land supply for social housing.
Tax administration and compliance
- The requirement to pay VAT and PAYE liabilities by direct debit from April 2029 – CTG previously responded to a consultation document on this and the potential impact on charities and will be looking into the detail of the proposals carefully.
- A call for evidence on “Modernising the Administration of Corporation Tax. CTG has been liaising with HMRC and highlighting members’ concerns around the practical issues around completion of corporation tax returns and will be responding to ensure these continue to be drawn to HMRC’s attention.
- A road map, published by HMRC for e-invoicing which is set to be mandatory from 1 April 2029. If they haven’t already done so, charities should start to consider how this may impact their existing accounting systems.
- An exemption from treatment as a benefit in kind for employers who pay the immigration skills charge or certificate of sponsorship fee for an employee or prospective employee sponsored under the Skilled Worker Route from 28 October 2026. This is also a timely reminder to those charities who pay such costs to ensure that their existing arrangements have properly accounted for these costs.
Culture and heritage
- Relaxation to the cultural gift scheme to remove the restriction on joint ownership of objects and to allow donors one opportunity within the five-year limit period to amend their remaining tax credit allocation, which will be of potential benefit for museums and galleries and those donating cultural gifts to them.
The confirmation of a zero rate of VAT for land sold to registered social housing providers is a welcome development. CTG has been actively engaged on this issue over the past year through meetings with MPs, representations in our Budget submission and a detailed response to the Government’s consultation, developed with members and the National Housing Federation.
More broadly, we welcome the commitment to continuing the work HMRC has begun to explore simplification and improve administration of the tax system. We expect further detail on a number of these measures in the coming year.
With a Spending Review due in 2027, there will undoubtedly be more to report on in the coming year. While the Budget contains a number of measures that charities will need to consider, particularly as further detail emerges, it does not fundamentally alter the existing framework of charity tax reliefs. CTG will continue to monitor developments and work with members to understand their practical impact on the sector and engage with HMRC, Ministers and parliamentarians to ensure charities have a voice at the top table.