The government will legislate to prevent abuse of charity tax rules and establish a social impact investment vehicle to tackle complex social problems, today’s Budget reveals. 

In her first Budget speech in the House of Commons, Rachel Reeves, the Chancellor of the Exchequer, set out widely anticipated increases to National Insurance payments by employers, which could cost the voluntary sector £800m a year. 

The measures are part of plans to spend an extra £100bn on public services over the next five years, including £600m of additional funding for social care and a £22.6bn increase in the health budget over the next two years. 

Reeves said the National Living Wage will increase from £11.44 to £12.21 an hour from April, which will help the lowest-paid workers in the voluntary sector and some of those who access charity services, but also put additional pressure on charity funds. 

The minimum wage for 18- to 20-year-olds will also increase, from £8.60 to £10 an hour. 

Reeves confirmed the government will proceed with plans to scrap VAT and business rates relief for charitable private schools, although schools in England that are “wholly or mainly” concerned with providing full-time education for pupils with an Education, Health and Care plan will remain eligible for business rates relief. 

Treasury documents released immediately after the speech show the government plans to legislate to prevent the abuse of charity tax rules, “ensuring that only the intended tax relief is given to charities”. 

It said the changes will take effect from April 2026 to give charities time to adjust to the new rules. 

The documents also reveal the government will start work on a “social impact investment vehicle”. 

The new initiative will “bring together socially motivated investors, the voluntary sector and government to tackle complex social problems”, the documents say. 

It will be designed and developed “through engagement with the sector”, with further details to be announced at phase two of the Spending Review next year.

The project will be led by the chief secretary to the Treasury working with the Department for Culture, Media and Sport, the documents say. 

The documents also show the Charity Commission is due to receive a £1.5m boost to its annual budget, with the figure rising to £29.4m in 2025/26.