Vulnerable beneficiaries are being left without essential support as charities across the UK are forced to scale back services or halt expansion plans due to surging operational costs, according to leading audit, tax and business advisory firm Blick Rothenberg.
The warning comes amid growing concern that increased National Insurance Contributions (NICs) and the rising National Minimum Wage (NMW) are placing an unsustainable financial burden on third-sector organisations — many of which are already operating on tight budgets.
“The effective rate of NIC that charities must pay has risen to 18% for many,” said Mark Hart, Audit, Accounting & Outsourcing Partner at Blick Rothenberg. “A charity with a £1 million salary bill would now face an additional £32,000 in NIC costs.”
To illustrate the financial strain, Hart noted that while the London Marathon raised £73 million in 2024, it would have needed to raise an extra £2.2 million just to offset increased NIC costs under the new rate and threshold.
Hart said several of his charity clients have already begun cutting back services or freezing plans to grow, directly harming those they support.
“A care home charity I advise has had to shelve investment in new resident facilities because the funds were swallowed by staffing cost increases,” he said.
Another client, a debt counselling and credit charity, has taken a £20,000 hit to its funds due to higher NICs and minimum wage obligations.
“That £20,000 could have helped dozens of people access emergency credit to survive while they work through debt,” Hart added.
Charities paying the London or National Living Wage — higher than the statutory minimum — are particularly affected. Many health and social care charities rely heavily on agency staff, pushing their staffing bills higher still. Local authorities often refuse to fully cover these costs, Hart warned, creating funding gaps that leave charities unable to hire new staff or expand services.
“Many organisations are now only hiring to replace those who leave — they simply can’t afford to grow,” he said.
Hart noted that the employment allowance available to some charities can reduce their NIC burden from 18% to 17%, offering limited relief. Similarly, businesses or organisations working less than 50% with the public sector can access this mitigation.
However, he warned that grouped organisations — such as federated charities or networks — may be disadvantaged, as only one entity per group can claim the allowance.
“It’s a complex system with limited support for those operating on the front line of need,” Hart said. “And in the end, it’s not the charities that suffer most — it’s their beneficiaries.”
Blick Rothenberg is calling for a rethink of the tax and funding environment for charities, particularly those delivering critical services in partnership with the public sector.
With local authority budgets already stretched and demand for support increasing, Hart said now is the time to provide greater financial flexibility to the organisations that “so often plug the gaps.”
“Charities want to do the right thing — pay fair wages, retain staff, and expand their services. But without urgent changes, many will be forced to do less, just when the people they support need them most.”
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Charity services at risk as rising staff costs hit support for vulnerable
