Monthly charity news and policy update - December

This month’s news and policy update brings significant developments for charities, with the Autumn Budget setting out major welfare changes and new tax measures at a time when many organisations are already under strain.

Alongside the Autumn Budget, the long-awaited update to the Charity SORP has been published, ushering in major reporting changes and a new tiered framework that will come into force from January 2026. Additionally, the government has confirmed plans to raise key charity thresholds, which should ease pressure on the audit market once implemented.

Finally, the creation of a new Office for the Impact Economy in No. 10 signals a renewed focus on social investment and purpose-led business, offering charities a clearer route into government discussions about impact and growth.

Read on for what these changes mean for your organisation and how DSC can help you make sense of the changes.

Autumn Budget

Chancellor Rachel Reeves delivered the Autumn Budget on Wednesday 26 October at a critical moment for charities. In the lead up DSC had written to the Chancellor with other members of the Civil Society Group, calling for a genuine partnership between government and the sector. The Chancellor’s announcement brought a mix of positive developments and areas of concern.

The headline announcement was the removal of the two-child limit for Universal Credit from April, a significant shift expected to lift 450,000 children out of poverty. The Chancellor also signalled further reforms to welfare and work assessments, which organisations supporting people into employment will want to examine carefully. In addition, the Red Book confirmed a new VAT relief for business donations of goods to charities from April 2026, a measure the Civil Society Group had specifically advocated.

However, aspects of the Budget may increase financial pressure for charity employees. Although the Chancellor technically maintained commitments not to raise income tax, VAT or National Insurance for working people, the continued freeze on income tax thresholds means many charity staff will pay more tax as wages rise. The planned increase to the National Living Wage will help low-paid workers but will also increase staffing costs for organisations already facing tight budgets.

Read Jay Kennedy’s full analysis here. 

Charity SORP has been updated

On Friday 31 October, 307 pages were released by the SORP-making body, marking the most significant update to charity reporting since 2019. With implementation beginning in January 2026, many trustees may be caught off guard by the scale of the changes.

A major feature of the new SORP is the introduction of a three-tier reporting system based on income levels. Tier 1 applies to charities with incomes up to £500,000, Tier 2 covers those up to £15 million, and Tier 3 applies to all organisations above that threshold. Despite strong sector arguments for a higher Tier 1 threshold to ease the burden on smaller organisations, the final version keeps the original income limits. The SORP-making body has said that it will conduct further consultation work after publication, which may allow for some refinements.

The new SORP also brings substantial changes to Trustee Annual Reports. All charities will need to report more clearly on volunteer involvement, and larger organisations will be expected to quantify volunteer contributions where possible. Reporting on impact becomes more explicit as organisations fall under higher tiers, and could increase the amount of narrative work required, even though charities already report on public benefit. For the largest charities in Tier 3, there are also new sustainability requirements that draw on ESG reporting used in the corporate sector, raising questions about proportionality and administrative pressure.

Find out more in our recent article by Jay Kennedy, DSC’s Director of Policy and Research, here. 

Changes to charity financial thresholds

The government has now released the results of its consultation on charity financial thresholds and intends to introduce several substantial legal changes as a result. These will require secondary legislation, and ministers have confirmed that none of the new measures will come into force before October 2026.

The proposals include raising the income levels that determine the type of scrutiny a charity must undergo. Under the new thresholds, charities would need an independent examiner once their income reaches £40,000, an examiner with specific qualifications at £500,000, a full audit at £1.5 million of income, and an audit based on asset value at £5 million. Each of these represents a significant increase on the current levels.

The increase in audit thresholds is expected to be particularly well received. Many organisations have highlighted concerns about a stretched audit market and the limited availability of auditors, and the proposed changes should help ease some of that pressure.

View the consultation results here. 

New Impact Economy Office in No.10

The government has announced a new Office for the Impact Economy, intended to boost the contribution of social investors, philanthropists and purpose-led businesses to communities across the UK.

Led by Darren Jones, the Chief Secretary to the Prime Minister in the Cabinet Office, the new unit is designed to provide a single, clearer point of contact for anyone looking to partner with government and grow social impact. Its creation follows recommendations from the Social Impact Investment Advisory Group and reflects a wider push to make every pound of public funding work harder by aligning it with impact capital.

The Office will oversee cross-government strategy on the impact economy, coordinate relationships with investors and philanthropy, and work with external stakeholders to shape how it operates. Sector organisations have welcomed the move, especially in light of the Civil Society Covenant.

The Autumn Budget announcement also confirmed that government is interested in “early opportunities to partner with the impact economy to crowd more capital and support into the Pride in Place Programme, to strengthen and scale activities to give every child the best start in life and diversify the children’s social care placements market. This work builds on the announcement of the £500 million 10-year Better Futures Fund, which the government plans to open for applications next year.”

Neil Heslop, Chief Executive of the Charities Aid Foundation, said “The office should help to mobilise more impact capital to tackle some of the biggest social challenges we face, and crucially, all of us must take the necessary steps to grow giving in the UK.” Find out more here.