Sarah Lomax, Co-CEO, Charity Finance Group
Chancellor Rachel Reeves delivered her 2025 Autumn Budget today, setting out the government's fiscal plans in a statement that the charity sector has described as a mixed bag of modest wins and more missed opportunities.
While charities welcomed the absence of major new financial burdens, unlike last year's budget, concerns remain about the long-term sustainability of organisations delivering vital services to vulnerable communities.
Commenting on the budget, Sarah described it as offering little to ease mounting pressures on the sector.
"Today's budget announcement from Chancellor Rachel Reeves was a real mixed bag," Sarah said. "We are thankful that, unlike last year's budget, no major burdens were placed on charities. However, there was little to ease the concerns around the financial sustainability of the sector."
A win for business donations
One clear victory for charities came in the form of new VAT relief on business donations of goods. The announcement, which follows a government consultation in the summer, will allow businesses to donate goods to charities for onward distribution or use in service delivery without incurring VAT costs.
"We certainly welcome the announcement of the introduction of VAT relief on business donations of goods to charities. It's a definite win for the sector and follows the government's consultation earlier this year in which CFG and other sector partners called for this relief to encourage an increase in business donations to charity."
Pension cap raises concerns
The government's decision to cap pension contributions through salary sacrifice schemes at £2,000, announced ahead of the budget, has generated mixed reactions. While the cap won't take effect until 2029, giving charities time to prepare, questions remain about its long-term impact on employers and scheme viability.
Sarah noted that concerns persist about whether the change could force employers to reconsider the pension schemes they offer.
CFG is currently conducting a survey to gather views from charities that may be affected by the policy shift. We urge all charities that might be impacted to complete the survey.
Wage increases without support
Perhaps more immediately concerning for the sector are the recently announced increases to both the National Living Wage and National Minimum Wage. While supporting fair pay in principle, charity leaders worry that without additional financial backing, these increases could have devastating consequences.
"Whilst we fully support fair pay for workers, we are concerned that without additional financial support for the sector, these increases will risk the unintended consequence of reduced charitable services precisely when they are needed most," Sarah warned.
Cost of living measures fall short
Within the Chancellor's speech itself, the charity sector found limited cause for celebration. The focus on cost of living issues was welcomed, as was the lifting of the two-child cap on child benefit, which will provide relief to struggling families.
However, the decision to freeze the threshold for the basic rate of income tax drew criticism. According to the Office for Budget Responsibility, this freeze will push hundreds of thousands of people into paying tax for the first time, potentially increasing financial hardship and driving up demand for charity services at precisely the moment when organisations are least equipped to respond.
A call for partnership
In October, CFG joined other organisations as part of the Civil Society Group to set out clear asks of the government. The group called for support to help the voluntary sector continue delivering vital services while facing multiple financial pressures. Today's budget failed to answer that call.
"Charities play an essential role in contributing to the government's missions, and we hope that the government will be showing its commitment to the Civil Society Covenant through actions, as well as words," Sarah said.
The organisation pledged to continue advocating for stronger collaboration between government and the charity sector, pushing for policies that maximise charities' ability to protect the most vulnerable members of society.
As charities across the country digest the budget's implications, the challenge remains clear: how to sustain vital services with rising costs, increasing demand, and limited new support from government coffers.
Read our full Autumn Budget briefing
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