It was hard to know what to expect from this year’s Budget, with the Prime Minister promising the “end of austerity”, and Brexit around the corner.
But after the Office for Budget Responsibility’s forecast provided an unexpected windfall, the Chancellor was able to announce increases to public spending and a number of business-friendly measures.
Some individuals were also given an effective tax cut, as the personal allowance and higher-rate threshold for income tax were both increased.
Among the larger announcements, a few changes were made specifically to tax rules for charities. So how will the Budget affect your organisation?
Changes to charity taxation
Three new measures were announced with the aim of reducing administrative burdens on charities. These are due to be introduced in April 2019.
Small trading exemption limits
For the first time in almost 20 years, the upper limits for the small trading tax exemption will increase.
This is a tax exemption for charities carrying out trading that is separate from their main purpose.
Where the charity’s turnover is under £20,000, the upper limit will rise from £5,000 to £8,000. For charities with a turnover exceeding £200,000, it will increase from £50,000 to £80,000.
Letters sent for the retail gift aid scheme
Charity shops using the retail gift aid scheme are currently required to send letters to donors every year, to tell them about the proceeds their donation has made.
From April 2019, these letters will only need to be sent every three years if the proceeds were less than £20 a year.
Robin Osterley, chief executive of the Charity Retail Association, said although this may not seem as dramatic as other Budget announcements, “the impact it will have on charities is actually very substantial”.
He said it will save “hundreds of thousands of pounds per year”, as well as relieving a considerable administrative burden for charities.
Gift aid small donations
Under the gift aid small donations scheme, charities can claim 25% gift aid on cash or contactless card donations up to an individual donations limit of £20 or less. This limit will increase to £30.
Other Budget changes
As well as specific changes for charities, some other measures announced in the Budget could have a significant impact on charities.
The VAT-registration threshold was frozen for an additional two years, so it will remain at £85,000 until April 2022.
Business rates were cut by a third for retail properties with a rateable value below £51,000, which could benefit many charity shops.
Meanwhile, tax changes for contractors are on the horizon, with confirmation of the extension of public sector IR35 reforms into the private sector.
Firms engaging contractors will be responsible for determining their employment status under IR35 rules, but small organisations will be exempt.
We’ve covered the main changes here, but other details of the Budget could relate to your organisation depending on its specific circumstances.
Get in touch at 020 8643 1166 to talk about how the measures announced in the Budget could affect you.