The chancellor’s autumn budget statement has added to this, announcing changes that could have a devastating impact by increasing costs while the availability of funding declines. In particular, the Nova Team is concerned by the plans to increase employer National Insurance Contributions starting in April 2025 which will put additional strain on many of our members whose services are often provided on behalf of our public sector colleagues through contracts or reduce demand on public sector provision.

What does this look like? The Prince of Wales Hospice, based in Pontefract, told us "the recent decision to raise the national minimum wage and employer NICs has come at a time when we are already operating at capacity and with a significant deficit. Like other charities, we must absorb these escalating costs without the ability to offset them elsewhere. The impact is to increase our expenditure by c. £200k next year. This is before any inflationary uplift on all other salaries or increments. To put this into perspective, we currently receive a core grant of £1.3m in NHS funding per annum. Therefore, to close this gap requires an increase in funding of over 15%. If we were to rely solely on charitable income to bridge this gap, it would require us to sell 50,000 more donated t-shirts at £4 in our charity shops; this is clearly unattainable. Despite new income initiatives we are putting in place, this increase to NI contributions will likely constrain service provision as we already carry a significant deficit."

As your local infrastructure charity, we’re here to support our sector to thrive – so it’s important for us to challenge these plans. We’re asking for your help to do this.

Here is what we’re doing

1. Asked you to complete our survey - to tell us what impact increased NI will have on your organisation. We have teamed up with the other infrastructure charities in West Yorkshire to build the picture of the impact of these plans and advocate at a local and regional level. We're currently bringing together the results.
2. Signed NCVO and ACEVO’s open letter – Nova and another 7,360 charities and voluntary organisations have co-signed this letter to the chancellor.
3. Sharing WYCAS’s simple wage costs spreadsheet – this allows you to calculate your increases in costs. You can tell us the answer in the survey above so we can demonstrate the significant impact of these plans.
4. Giving you this template to write to your MP – you can use the figures calculated above in this letter and find contact details for your MP on the UK Parliament website.
5. Sharing NAVCA’s list of headlines from the budget – so you can be informed about what is happening and consider how it may affect your work, details below.
6. Offering you support – from the Nova Team and our partners WYCAS, details below.

Headlines from the budget

• National Living Wage to rise by 6.7% to £12.21 from April 2025. The National Minimum Wage for 18 to 20-year-olds will rise to £10 per hour, an increase of 16.3%. Find the full list of rates on the Government website.
• Working age benefits will increase by 1.7% from April 2025 in line with the September figure for inflation.
• The employer national insurance contribution (NIC) will increase by 1.2%, from 13.8% to 15% from April 2025. The threshold above which employer NIC is paid will be reduced to £5,000 from £9,100.
• £1 billion for Household Support Fund and Discretionary Housing Payments in 2025-26.
• The overall budget for local government has increased by £1.3 billion primarily through additional funding for social care (£600M), and £230 million for homelessness and rough sleeping. (national totals)
• There will be a £22.6 billion increase for day-to-day spending for the NHS and an increase of £3.1 billion in the capital budget for 2024-25 and 2025-26.
• The UK Shared Prosperity Fund will continue for a further year at a reduced rate of £900M.
• £240 million for pathfinder projects for employment support programmes as part of plans in the Get Britain Working White Paper.
• Charitable relief for business rates is retained, including for charity shops.

What support is available?

You can request support from our Adviser Team by signing into your account on Nova's database and completing the short form on the right.

Every Monday afternoon, from November 11th to December 16th, you can book a free 30 minute advice session with our partner WYCAS where one of their Community Accountants will take you through the tools (see here for the full range),and/or answer any budgeting questions you may have. Contact info@wycas.org.uk to book your place (please put ‘Free Budgeting Support’ as your e-mail subject).

We have organised a workshop on full cost recovery on Friday 13 December, register your place now.

Further information about implications of changes

We are sharing insights about the budget from NAVCA:

“Whilst the increase in National Living Wage will make a positive and very welcome difference for many millions of low-paid workers, particularly those aged 18-20, for the VCSE sector this poses two issues. Firstly, increases in salary and National Insurance costs will not be covered within existing grants and contracts. This will either squeeze overheads or see organisations having to subsidise additional costs from reserves or other charitable sources. Secondly, this further reduces the differential in pay between roles that are paid National Living Wage, with officer / administrative roles attracting salaries of £23-27,000 per annum. This is unlikely to aid continuing recruitment challenges. The costs of increased employer NICs are likely to be reflected in reduced wage increases over the next couple of years, contributing to continued pressure on overall household income for many employees.

The significant injection of additional day-to-day and capital spending into the NHS is extremely welcome. The change in approach to thinking about health is currently being consulted on via proposals for a Ten Year Plan for the NHS. Moving from hospital to community, sickness to prevention, and from analogue to digital will require a sizeable contribution from the VCSE sector and local infrastructure, which needs to be fully funded and resourced.

The continuation of the Household Support Fund and Discretionary Housing Payments will alleviate some pressures on the poorest households, and enable many VCSE organisations to provide frontline services for the most vulnerable. It is currently unclear how funding will be allocated between the HSF and DHP, though funding both of these will help relieve potential additional unfunded costs that would have been borne by both the VCSE sector and councils if funding had stopped in April 2025.”

Employer National Insurance Contributions

The rate of employer NIC will increase by 1.2%, from 13.8% to 15%, from 6 April 2025. The per-employee threshold at which employers start to pay National Insurance will be reduced from £9,100 per year to £5,000 per year. This means that more low paid jobs are brought into employer NIC.

The Office for Budget Responsibility, the Institute for Fiscal Studies and the Resolution Foundation both suggest that these additional employer costs will feed through either as reduced wage growth or a reduction in wages (for those not on National Living or Minimum Wages). These organisations suggest that it is unlikely that, overall, there will be fewer people working as a result.

To support small businesses including charities and community sports associations, the Employment Allowance which reduces employer NI liability, will increase from £5,000 to £10,500. This will effectively reduce the total employer NI liability by £10,500 in 2025-26 and will apply to all eligible employers. HM Treasury estimate that 865,000 employers will pay no NICs next year, and a further 1 million will pay the same or less NI than last year. Further information is needed to understand the full implications of this for VCSE organisations.

Resources where you can read more

• Autumn Budget 2024: https://www.gov.uk/government/topical-events/autumn-budget-2024
• NCVO and ACEVO’s open letter the chancellor on the impact of increased employer National Insurance Contributions for charities: https://www.ncvo.org.uk/news-and-insights/news-index/open-letter-chancellor-national-insurance/
• Resolution Foundation Analysis: More, More, More: https://www.resolutionfoundation.org/app/uploads/2024/10/More-more-more.pdf
• The Institute of Fiscal Studies: Autumn Budget 2024: initialIFS response: https://ifs.org.uk/articles/autumn-budget-2024-initial-ifs-response