As the 2026/27 tax year begins, charities face another wave of important tax, payroll, and compliance updates. While many thresholds remain frozen, several targeted reforms, particularly around donated goods, benefits‑in‑kind, and charity tax compliance, are set to shape the landscape for the year ahead.
Here are the four key tax areas charities need to know for 2026/27.
Payroll & employment taxes: higher wage costs and frozen thresholds
Although headline thresholds remain largely unchanged, wage costs for charities will rise due to increases in the National Living Wage.
National Living Wage (from April 2026)
- Age 21+: £12.71 per hour
- Age 18-20: £10.85 per hour
- Apprentices under 19 or in year one: £8.00 per hour
Frozen Allowances and NIC Thresholds
- Personal Allowance and most Class 1 NIC thresholds remain frozen until 2031
- Lower Earnings Limit increases from £125/week to £129/week
Statutory Payments (from 6 April 2026)
- Statutory Sick Pay (SSP): £123.25/week; eligibility at £129/week
- Family‑related pay: £194.32/week
Benefits‑in‑kind: delays & expanded reliefs
Mandatory payrolling of benefits‑in‑kind is delayed to April 2027. Voluntary registration is only open until 5 April 2026.
New tax‑free workplace benefits include eye tests, corrective appliances for screen‑based roles, flu vaccinations, and essential home‑working equipment.
Existing exemptions remain, including annual health screening, £500 return‑to‑work medical treatment, and approved counselling.
VAT updates: thresholds & a major reform for donated goods
Just as a reminder, the VAT thresholds remain at:
- Registration threshold: £90,000
- Deregistration threshold: £88,000
The main change charities can benefit from, effective from 1 April 2026, is the Reform for Donated Goods, as businesses will no longer need to account for VAT when donating goods used in charitable activities or distributed to beneficiaries.
Value limits:
- £100 per item
- £200 for essential electrical items
Applies only to HMRC‑registered charities and is intended to reduce waste while increasing the flow of surplus goods.
Charity tax compliance: tighter rules, legacy restrictions & new HMRC powers. Small trading exemption remains at £80,000 per year.
Trading subsidiaries unable to fully gift‑aid profits will face corporation tax at 19%–25%.
Compliance reforms from April 2026 include:
- A broader tainted‑donation test based on the outcome of an arrangement rather than motive
- New requirements ensuring approved investments genuinely serve charitable purposes
- Legacy income must be used solely for charitable purposes
- HMRC gain new powers to sanction trustees and managers who fail to meet tax obligations
These reforms aim to protect the integrity of charity tax reliefs while promoting stronger governance.
If you have any questions regarding to the tax changes, speak to a member of the team.
This material is for informational purposes only and should not be relied upon as professional advice.
