Wbg, one of Scotland’s leading independent specialist full-service accountancy firms, has warned that new rules introduced by Chancellor Rachel Reeves in her first budget under the new Labour government are likely to be particularly burdensome to charities.

One of the headline points which will impact business across the country was the amendments to Employers National Insurance, which was increased to a rate of 15% on salaries above £5,000 from April, up from 13.8% on salaries above £9,100.

The expectation is that this will raise an additional £25 billion a year to help fund public services.

An increased tax burden on employers had been widely expected in the run up to the announcements, and the consequence of this will be an increased taxation liability for a majority of businesses across the country.

Rory McCall (pictured above), director, audit at Wbg, said: “These new rules are likely to be particularly burdensome to charities, many of whom have been facing significant real terms funding cuts in recent years and are already struggling to generate sufficient income from fundraising to avoid recurring deficits.

This situation has only been exacerbated in recent years following the Covid-19 pandemic.”

McCall notes that the additional costs, which SCVO estimates is likely to cost Scottish charities £75million, are likely to put further strain on finances.

McCall commented: “It could potentially lead to many charities having to find further ways to cut costs to balance their books, which may extend to service or staffing cutbacks and reductions in pay awards.

The Scottish Government has now joined growing calls from charities and public sector organisations to provide financial assistance to cover the increased NI costs they’re likely to face, with First Minister John Swinney suggesting recently that the UK Government should provide additional funding to cover these in their entirety.”

In the meantime, Wbg advises charities across the country to plan for the increase in NI rates.

McCall said: “Financial planning, budgeting and forecasting remains a critical tool for ensuring financial stability and these should be revisited to ensure all potential cost increases are factored in and are carefully considered by management and trustees on a regular, ongoing basis.”