The increase in employers’ National Insurance contributions could cost the UK voluntary sector £800m a year, estimates indicate. 

Rachel Reeves, the Chancellor of the Exchequer, confirmed in her Budget speech in parliament today that the government would increase the rate of employers’ National Insurance contributions but the government would also increase the relief that employers can claim on their total NI bill. 

Documents released by the Office for Budget Responsibility show that the average annual tax increase for employers would be “in excess of £800 per employee”. 

Based on the approximately one million people working in the UK voluntary sector, this would suggest a total increase in the sector’s NI bill of £800m a year. 

Reeves said the rate of employer National Insurance contributions would increase from 13.8 per cent to 15 per cent in April 2025. 

The government will also reduce the threshold at which employer NI contributions start being levied from £9,100 to £5,000 a year. 

But at the same time, it will increase the Employment Allowance, a relief that employers can claim on their total NI liabilities, from £5,000 to £10,500 and remove the Employment Allowance threshold, which will mean that all eligible employers can claim it, rather than those with liabilities below £100,000 a year. 

The OBR said that about 1.2 million employers of all types will be affected by the changes, with 940,000 being worse off and 250,000 gaining from the measures. 

It is not clear from the OBR data what proportion of charities would fall into either group. 

“This results in an average annual tax increase in excess of £800 per employee,” the OBR said.

“The average employer who loses out will see their liabilities increase by around £26,000.”

Jane Ide, chief executive of the charity leaders body Acevo, said: “The Chancellor spoke today about the difficult choices she’s made in order to stimulate growth, and we welcome announcements about increased funding for the NHS, education and housing, which we know many in our sector have called for.

“However, we are deeply concerned about the impact the triple whammy increase in employers’ National Insurance contributions, reduction of the threshold at which employers need to pay and increase in the National Living Wage will have on civil society organisations and the work they deliver. 

“Civil society leaders have very limited choices to make in how to manage these significant increases in operating costs. 

“The harsh reality is that many organisations may be forced to reduce staff, cut salaries and, most importantly, scale back services for the very people they strive to support.”

She said that if civil society is to work with the government in delivering a decade of national renewal, as per the Prime Minister’s invitation, it was important the sector was strong and able to play its part. 

“The changes announced today will affect the resilience of civil society and its vital role as a trusted partner in helping the government achieve its vision,” she said.