More than half of UK charities say they may not survive the year, as a sharp rise in employer National Insurance contributions (NICs) deepens the financial crisis facing the sector.
According to a new report by Howden, the insurance broker, the increase in NICs from 13.8 to 15% in April - combined with a lowered earnings threshold - has emerged as the single most pressing challenge for Britain’s voluntary organisations. Over half (51%) of charities surveyed said they are at risk of closure in 2025, up from 43% in 2023.
The Rewarding Industries 2025 report is based on a survey of 314 senior financial decision-makers working in charities across the UK. It paints a stark picture of a sector caught between rising costs, falling donations, and unrelenting demand for services.
Unlike commercial enterprises, charities have little means of offsetting tax rises through price increases or other traditional mechanisms. Many are instead being forced to take drastic measures to remain solvent.
Nearly one in five are cutting or freezing staff salaries, while 21% are reducing benefits. Office downsizing, remote working and corporate partnerships are also on the rise. Larger charities, which tend to carry higher wage bills, are particularly affected, with 26% of those earning over £50 million implementing salary freezes.
Mark Fisher, associate director at Howden, said the NIC rise "couldn’t have come at a worse time", noting that it threatens vital services provided by charities to some of the UK’s most vulnerable communities.
Fundraising continues to deteriorate, with 57% of respondents reporting increased difficulty compared to last year, and 55% attributing this to the decline in cash donations. Cost-of-living pressures are reducing household giving, even as demand for charity services climbs. One third of charities cited the NIC rise as one of their top three operational challenges - higher than any other issue.
While many organisations have responded by launching retail operations or experimenting with prize draws and lotteries, these measures offer only limited relief. A full 65% said they are actively searching for new revenue streams, and 78% reported operating charity shops to help fund their work.
A growing number of charities are turning to digital tools to bolster fundraising, streamline operations, and expand reach. Yet these innovations bring fresh risks.
Almost all respondents (92%) said they or their organisations had been targeted by cyber criminals in the past year, while just 24% felt adequately prepared for cyber threats. High-profile incidents, such as the 2024 ransomware attack on the Big Issue Group, have underscored the vulnerability of the sector.
Despite these risks, three-quarters of charities plan to invest in new technologies or automation in the coming year. Many are exploring AI, cloud storage, and biometric tools to boost efficiency and engagement.
The sector’s workforce is under strain. Seventy-one per cent (71%) of charity staff are considering leaving for better-paid roles, with 30% of organisations citing skilled labour shortages as one of their most pressing problems.
Although some charities have made gains in staff wellbeing and inclusion - with 81% reporting initiatives to improve diversity - they remain limited in their ability to match pay offers from other sectors. A fifth have frozen staff benefits, and nearly as many have frozen wages.
Still, there are signs of hope. Two-thirds of respondents said their financial position had improved over the past year, and 62% expect further improvement in the next 12 months - a reflection, perhaps, of the sector’s resilience in the face of daunting odds.
