Budget changes require careful financial planning

The Budget was fairly sparse on announcements specifically for the charity sector, but there were a number of key budget changes that will have long-term implications.

The incremental increase in the National Living Wage for over 25-year-olds to £7.83 from this April – an increase of 4.4% – will benefit many employees, but the financial impact will need to be carefully managed by charity decision-makers. Research from the Third Sector Research Centre shows that the total increased cost to the sector by 2020 will be a minimum of £500 million.

Charities that provide residential, social or public services, where there is a higher percentage of paid employees, may be particularly hard hit in the long-term, explains payroll specialist and Associate Director James Alesbury.

“Careful financial forward planning will be vital for the majority of charities in order to accommodate these changes within their own annual budgets,” says James.

“In real terms, it could see full-time workers seeing a £600 annual pay rise and it will be important for charities to mitigate this impact by reviewing costs across the organisation and looking to see where any savings can possibly be made.”

Other key budget change announcements for the sector include:

• Employees on maternal or paternal leave will now be gifted a 12-month pause from paying contributions, up from six months previously, in tax-advantaged employee share scheme, also called Save As You Earn (SAYE). James says: “This will be welcomed by many as it adds more flexibility in an age where the charity workforce is increasingly diverse.”
• The government announced that a further £36 million will go to armed forces and emergency service charities over the next three years. This will mean the end of the LIBOR Charity Funding Scheme, bringing the total of funding commitments to £773 million.
• Rises in business rates are to be pegged to CPI measure of inflation, not higher RPI, from this April. James says: “This should come as welcome news to the sector, but the lack of confirmation of a 100% business rate relief for all charities remains a concern.”

For more information on how the budget changes may affect you and how to mitigate any impact, contact James on 023 8046 1222.