How is the not-for-profit sector impacted by the Budget? – Autumn Budget 2026

The not-for-profit sector went into this year’s Budget facing a challenging combination of rising demand, increasing employment costs and continued pressure on funding.

Many charities, registered providers, social enterprises and community organisations were therefore looking for measures that would strengthen financial resilience and support the delivery of essential services.

Whilst the Budget did not contain any major sector-specific tax reforms, there were several announcements that may affect the not for profit-sector particularly in relation to housing and homelessness initiatives and employment costs.

Housing and homelessness initiatives

The announcements made before and during the Budget were targeted to increase social housing development and reduce rough sleeping.  The key points impacting social housing providers and charities helping the homeless included:

• A further £432 million to offer rough sleepers a route off the street, taking the total investment to end rough sleeping to £874m and enabling the support to continue to the end of this parliament.
• No major changes to building regulations in this parliament, except where critical for safety, in order to help get more new homes built.
• Introducing a new VAT relief for land sold to registered social housing providers effective from 1 April 2027, making this VAT-free to help expedite the construction of social housing.
• An additional £1.5bn will be provided to deliver around 10,000 homes in England, prioritised for social rent and council homes. This will take the total government funding commitment for the social and affordable housing programme to £40bn across 10 years.
• Bringing forward amendments to the Social Housing Bill to help retain more social homes and ensure they are allocated to those who need them most.
• Introducing a licensing regime to enforce national standards for supported housing from 2027‑28

With 77% of all social housing delivered last year coming from housing associations, they will continue to have an important role in helping the government achieve its social and affordable housing programme.

National living wage increases

The Budget confirmed a 3.9% increase in both the national living wage and national minimum wage rates from April 2027. Whilst the sector will support measures designed to improve living standards, the increase is likely to add further pressure to staffing budgets at a time when many organisations are already facing rising employment costs.

For those operating in labour-intensive sectors such as social care, community support and housing, staffing costs represent a significant proportion of expenditure. Trustees and management teams may therefore need to factor these increases into future budgets, grant applications and service contracts.

Tax-free mileage rates

In May, the government announced a temporary 55p per mile rate for the first 10,000 business miles for cars and vans which is now being made permanent. The government is also increasing the mileage rate above 10,000 business miles from 25p to 35p. Whilst this will benefit many employees, including care workers, housing support workers and others delivering services out in the community, it will have a corresponding increase for charity expenditure.

No significant changes to gift aid

Ahead of the Budget, many sector bodies had called for the modernisation of gift aid and wider reforms to encourage charitable giving.

However, the Budget did not introduce any significant changes to gift aid or the tax treatment of charitable donations. Whilst some organisations may be disappointed by the lack of reform, the existing reliefs remain available and continue to provide valuable support for fundraising activities.

Charities should therefore continue to ensure they are maximising gift aid claims wherever possible.

The Budget did not deliver the significant not for profit-sector tax reforms that some organisations had hoped for. However, investment in housing and homelessness initiatives may provide opportunities for many organisations. At the same time, the increase in the national living wage will add further pressure to already stretched budgets.

For trustees and management teams, the focus is therefore likely to remain on financial resilience, effective fundraising and careful cost management. Organisations should review the impact of rising employment costs while considering how wider government investment programmes may create opportunities to support their beneficiaries and communities.

If the Budget has raised any questions for you, book your place on our question time webinar this Friday at 9:30am. Alternatively, if you would like any further information or guidance on this topic, get in touch with your usual Kreston Reeves contact or contact us here.