All forgotten?
This was an interesting Budget delivered by the Chancellor with some exciting announcements for other sectors. However, the word ‘charity’ was not even mentioned once.
It felt like the Budget’s main focus was to win over taxpayers and votes before the impending General Election. This was reinforced by the fact the Chancellor did not address the findings from the recent charity tax compliance consultation, which closed in Summer 2023, putting changes in the current tax system on the back burner.
Although not naming the sector specifically, the Chancellor did announce measures to help those groups that charitable organisations support. He announced that:
- The most vulnerable in society would be supported with an additional £500 million through the extension of the Household Support Fund – helping with the cost of essentials.
- £26.4 million to upgrade the National Theatre’s stages and infrastructure.
- An additional £5 million of funding to continue to support village halls.
- £100 million of funding for cultural projects.
- £6 million of funding for community-led regeneration projects.
A summary of the main announcements impacting the sector can be found below:
Employee remuneration
The biggest headline that excited the media over the past 24 hours was the announcement regarding National Insurance contributions.
Since January 2024, Class 1 Employee National Insurance is charged at 10% on earnings between the primary threshold and upper earnings limit. However, it was announced that this will be cut again to 8% from 6 April 2024. This change comes into effect one month from today, leaving payroll software providers little time to update their software and ensure these updates are reached to their end users in time to process payroll.
Payroll staff in charities and their trading subsidiaries will need to keep this in mind to ensure their software is ready for the change.
VAT
Very little was mentioned in terms of VAT. However, the Chancellor did announce that, from 1 April 2024, an increase in the VAT registration threshold for taxable turnover from £85,000 to £90,000. Also, from that date, businesses may apply to deregister when taxable turnover falls below £88,000.
Cultural tax reliefs
In comparison to the subtle changes and clarifications made to cultural tax reliefs, the Chancellor announced that the increased tax credits for Museum Galleries and Exhibition Tax Relief (MGETR), Theatre Tax Relief (TTR) and Orchestra Tax Relief (OTR) will now be permanent. These reliefs had been due to drop back to their lower rates from 1 April 2025.
The tax credits will now be:
- 45% for touring productions and all orchestra productions; and
- 40% for non-touring productions.
The final announcement was that MGETR, which was due to end on 31 March 2026, will also be permanent through the removal of the sunset clause.
These are very welcome changes and provide recognition for the sector’s invaluable work in educating and enlightening the minds of the public and continuing investment in tourism.
Previous announcements
Creative tax reliefs – introduction of administrative requirements
As a reminder, charities claiming creative or cultural tax reliefs will be required to complete an online form to accompany the submission of any claims from 1 April 2024.
National Living Wage
This will rise to £11.44 from April 2024 and will need to be factored into budgets.
Business Rates Relief
Trading subsidiaries of charities that claim Business Rates Relief will continue to benefit from the enhanced relief, as measures were previously announced to extend the 75% relief for the retail, hospitality and leisure sectors until 31 March 2025.
A cap of £110,000 remains.
Brexit
As a result of Brexit, the Government has restricted the availability of tax reliefs to UK charities and community amateur sports clubs and removed tax relief for UK donors on donations to overseas charities.
Personal tax allowance and thresholds
The personal allowance and personal tax thresholds are still frozen, which means that more people will start paying tax and, therefore, there may be donors that can Gift Aid their donations when previously this was not the case.
Corporation Tax rate
The Corporation Tax rate continues to be 25% for companies with profits in excess of £250,000. This means that companies that make donations to charities benefit from 25% tax relief rather than the previous 19%.
To find out more or discuss your individual tax needs, please contact a member of the Tax team on 0333 123 7171.
