Rachel Reeves' brutal tax moves could spell the end of UK charity shops

Chancellor Rachel Reeves has been urged to cut "eye-watering" employer National Insurance taxes at the next Budget or risk losing charity shops from Britain's high street. Individual charities and industry sector bosses have sounded the alarm over Ms Reeves's sweeping employer NI contributions (eNIC) hikes announced in October.

Previously all businesses paid a rate of 13.8% on employees' earnings above £9,100 a year, but from April 6, firms, including charity shops, have had to pay NI at 15% on salaries above £5,000. Ms Reeves's tax on employers has been another kick in the teeth for the bricks and mortar retail sector, including charity shops. The high street economy was already suffering from soaring energy and running costs, as well as a downturn in footfall and profits sparked by online competition.

Now charity sector chiefs have warned the Labour tax could risk the "long-term" future of the nation's charity shops, a beacon of Britain's generous spirit in towns and cities across the land. They have argued charities themselves play a huge role in saving the Treasury money in the first place, by supporting local and national government services and the NHS.

Saskia Konynenburg, interim Chief Executive of NCVO, a membership community for charities, voluntary organisations and community groups in England, told the Daily Express: "The pressure of rising costs, inflation, and increases to National Insurance contributions are creating real challenges for charities and their charity shops.

"There is real concern about their long-term sustainability if action isn't taken. Losing charity shops is not only a loss to the causes they fund, but also to the communities who rely on them."

Ms Konynenburg added the NCVO, which has over 17,000 members, would like to see Ms Reeves "recognise the contribution charity shops and their charities make to both the economy and society". She has called on the Chancellor to "exempt" charities "from eNICs costs".

She said: "Supporting charity shops ultimately supports charities in delivering services that complement and, in many cases, reduce pressure on public services. Protecting this part of the voluntary sector is therefore in everyone's interest."

Robin Osterley, Chief Executive of the Charity Retail Association (CRA) said the real issues facing the charity shop sector have not been about sales, they've really been about costs. "In particular the costs associated with the last budget", he said, "National Insurance increases in particular have hurt the sector quite considerably because there's been a large of amount of part-time people working in the sector and of course they've been swept up in the change of NI thresholds, plus general inflationary costs and so on and so on."

Asked if the sector was looking for some relief from Rachel Reeves in the autumn Budget, Mr Osterley added: "Charity shops perform an incredibly important function in society in general, as well as in town centres, they are raising money for good causes, for charities that are in lots of ways relieving the Government of having to provide certain types of services, so it would be very nice if there was some additional relief... but it would not be right to say we are specifically calling for that... our sector is no different from retail as a whole, it's no different from hospitality, it's not different from a lot of industries that are suffering."

Individual charities have supported the message from industry bodies. Andrew Vale, Director of Commercial Income at the mental health charity Mind, said: "The increase in employers' National Insurance contributions continues to put strain on our retail network. A large proportion of our income, £5million last year, comes from our shops, and they are embedded in the heart of local communities across England and Wales, providing jobs and volunteering opportunities to so many people.

"Across our network of shops, the implications of the eNIC rise is eye-watering. It adds to the growing number of challenging factors we're facing in the charity retail sector."

Jacqui Woolley, Retail Director at Marie Curie, a leading UK end of life charity, said: "The increase in National Insurance contributions adds to an already increasingly challenging financial climate that our charity shops - and the charity as a whole - are operating in across the UK. With NIC rates increasing, many charities are facing substantial additional payroll costs, with shops that operate on tight budgets being particularly vulnerable.

"Our charity shops are key in helping to fund Marie Curie's hospices, nursing services and information and support services, which are largely funded by donations. Our stores are at the heart of local communities and we're so grateful for the continued generosity of our supporters. We need to raise more funds with local communities to cover these increased costs. Good-quality donations to our stores give us the best chance to raise those funds."

The Treasury said it provided support to charities through a range of reliefs and exemptions, including reliefs for charitable giving.

A Government spokesperson said: "We support our charities through one of the world's most generous tax regimes for the sector which provided £6bn in relief for the sector last year alone, including exemptions from paying business rates.

"This comes on top of doubling the Employment Allowance to protect the smallest charities and creating a new Civil Society Covenant to usher in a new era of trust and partnership to tackle some of the country's biggest challenges."