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Budget 2021 – what is the outlook for charities?

Author: Kristina Kopic, Head of Charity and Voluntary Sector, ICAEW

Published: 19 Mar 2021

On 3 March 2021, the Chancellor extended coronavirus support measures and outlined a series of measures aimed at supporting the rebuilding of the economy post-COVID. But what were the key announcements for civil society organisations and their beneficiaries?

Demand for charitable services

The extension of the coronavirus support measures such as the job retention scheme, will be a relief to many workers currently furloughed, and contribute to a lower peak of unemployment in the OBR’s forecast (6.5 percent) than previously anticipated. This is good news and may mean that income from regular donations is less likely to fall significantly. However, the freeze of the Income Tax personal allowance for five years will be a blow to the lowest paid who will feel the effects in the coming years.

According to Paul Johnson, Director of the Institute for Fiscal Studies, the budget announcement did not address inequalities in society sufficiently. Johnson was critical of the lack of long-term vision of the budget to deal with the unequal consequences of the pandemic: “No money to deal with post pandemic priorities. No policies to deal with the inequalities that have opened up over the last year between rich and poor, old and young, more and less well educated. This is a big hole in the chancellor’s and the government’s policies, a hole which needs to be filled and soon if we are not to suffer a much worse hangover from this crisis than need be the case.” More information is needed about the government’s longer-term plans to support the most marginalised members of society as we slowly emerge from the pandemic, because charities have not received enough additional funding to provide a safety net for all those affected by the pandemic.

The likely reduction in the foreign aid budget has been criticised by a coalition of charities working internationally. Charity leaders working with some of the most vulnerable communities in more than 200 countries wrote an open letter  to the Prime Minister to call for an international, collaborative response to COVID-19, that cannot be achieved if the UK reneges on its promise to spend 0.7% of our gross national income on aid and development: “A u-turn on your manifesto commitment to maintain the 0.7% target would signal we are a nation willing to balance its books on the backs of the world’s most marginalised people, many of whom are dealing with the impact of COVID-19 on top of existing hardship.”

Support for the charity sector

There was not a lot of targeted support for the sector in the budget with arts, culture and sport the main beneficiaries of specific recovery funding for the sector. While the continued Covid support measures and extended tax reliefs will be of help to many charities, the demands from the sector for support measures and specific initiatives, such as a temporary gift aid supplement, were ignored.

Summary of the key announcements relevant to civil society organisations:

Additional funding for charitable services

  • £10 million to support veterans with mental health needs across the UK
  • £19 million to tackle domestic abuse in England and Wales, with funding for a network of ‘Respite Rooms’ to support homeless women and a programme to prevent reoffending
  • £90 million funding to support government-sponsored national museums in England
  • £300 million for major spectator sports, supporting clubs and governing bodies in England
  • £300 million to support theatres, museums and other cultural organisations in England through the Culture Recovery Fund
  • £150 million Community Ownership Fund will allow communities across the UK to invest to protect the assets that matter most to them such as pubs, theatres, shops, or local sports clubs
  • Lifetime commitment to continue the Thalidomide Health Grant in England when existing funding runs out in 2022/23

General Covid-support measures

  • An extension of the Coronavirus Job Support Scheme to September 2021 across the UK with employer contributions from July
    £5 billion for new Restart Grants – a one off cash grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England
  • A new UK-wide Recovery Loan Scheme to make available loans between £25,001 and £10 million; further clarification is sought to confirm that charities will be eligible
  • Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee from the Government
  • Charities may now be able to access additional grant funding after the government lifted allowance limits that were capped by outdated European Union state aid rules following successful lobbying by the Charity Retail Association and Charity Tax Group

Tax – most relevant announcements for charities

  • Extension to the VAT cut to 5% for hospitality, accommodation and attractions across the UK until the end of September, followed by a 12.5% rate for a further six months until 31 March 2022
  • 100% business rates relief extended to 30 June
  • Social Investment Tax Relief, a scheme launched in 2014 to incentivise investments by philanthropists in social enterprises, will be extended for an additional two years

Find out more:

Charity Tax Group’s summary of the Budget implications on charities.  

Small Charities Coalition summary of the Budget implications on small charities.  

Read ICAEW's analysis of the Budget announcements for the broader economy.

Read the government’s Budget documents.