Members of the House of Lords have voted in favour of exempting smaller charities from the upcoming increase to employer national insurance contributions (NICs).
In a debate yesterday, Conservative peer Baroness Neville-Rolfe tabled an amendment that would exempt charities with an annual revenue of less than £1m from the government’s planned increase in NICs from 13.8% to 15% from 1 April.
Neville-Rolfe’s amendment was agreed by her fellow peers yesterday evening, with 235 voting in favour and 149 against.
The NICs bill will proceed to a third reading in the House of Lords next month.
‘Misguided budget decisions’
Charities are expected to pay £1.4bn a year more in annual tax contributions following the NICs rise but the government has so far refused to offer any concessions to the sector.
Previous attempts by MPs to exempt charities generally from the rise, as the bill passed through the House of Commons, also failed.
Speaking in the Lords yesterday, Neville-Rolfe said: “Noble lords across the house have been contacted by many charities which are facing tough financial decisions. We have had many worrying examples throughout the stages of this bill.
“My noble friends Lady Sater and Lady Fraser made the case for action strongly.
“My latest example was L’Arche in the UK, which brings together people with and without learning disabilities in life-sharing communities.
“Again, they are facing hugely steep rises in employment costs. The most vulnerable people in our society will pay the price for ministers’ misguided budget decisions.”
Financial secretary to the Treasury Lord Livermore said in response: “The government of course recognises the important role that charities play in our society and the need to protect the smallest businesses and charities.
“That is why we have more than doubled the employment allowance to £10,500. This means that more than half of businesses, including charities, with national insurance liabilities will either gain or see no change next year.
“As I have noted previously, it is important to recognise that all charities can benefit from the employment allowance.
“The government also provide wider support for charities via the tax regime, with tax released for charities and their donors worth just over £6bn for the tax year to April 2024.”
Sector bodies: ‘Drop in the ocean’
Charity sector bodies welcomed the amendment being approved but bemoaned a lack of similar support for larger charities affected by the NICs rise.
Debra Allcock Tyler, chief executive of the Directory of Social Change, said: “Whilst it's good that small charities are being helped in this way, the biggest impact on the sector is on the medium to large who face over a billion pounds of additional unanticipated costs – which they have to find a way to absorb.
“It’s the equivalent of getting to Everest Base Camp – it’s a start which will help some, but it’s a drop in the ocean in the face of the cuts to staff and services that are already happening across our sector.”
Shareen Patel, policy and influencing officer at ACEVO, said: “ACEVO welcomes yesterday’s vote by peers in favour of exempting small charities from the national insurance contributions rise.
“This decision is a positive step forward to help protect our sector from additional financial burden and enable smaller charities to focus their resources more towards the communities they serve and the causes they seek to protect.
“ACEVO will continue to advocate for further measures to support our sector, ensure its long-term resilience and ensure that vital services can be provided without disruption.”
Ida Karlsson, policy officer of the Charity Finance Group (CFG), said: “It’s a step in the right direction and a clear indication that peers recognise and value the work that charities do.
“Charities, CFG and other infrastructure bodies have worked hard in the past three months to explain the enormous impact the rise will have.
“Our research last year showed that the charities that will be hit hardest are the thousands of medium to large sized organisations that are unable to absorb the additional costs.
“Naturally, we would have liked to have seen a full exemption, but we’re pleased that parliamentarians have listened to the sector’s arguments which have led to this important vote.”
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