Business rates relief cut for charitable independent schools could be the thin end of the wedge, says RSM UK
HMRC charity tax relief statistics show that gift aid payments have stagnated, but business rates relief claims by charities, the single biggest source of tax relief for the sector, continue to grow. However, this is set to take a hit after Labour confirmed it would be abolishing business rates relief for charitable independent schools in England from April 2025.
Total reliefs for charities have grown £1.3bn over the last nine years, with business rates relief accounting for nearly two-thirds (62%) of that increase. Currently around 50% of private schools in England are registered charities and therefore benefit from charitable rates relief.
Andrew Robinson, tax partner at the leading audit, tax and consulting firm RSM UK, comments: “As the single biggest source of tax relief for the charity sector, there will be concerns that Labour’s removal of business rates relief for private schools is the thin end of the wedge. The consequences are likely to be significant, and with Labour apparently facing a £22bn hole in public finances, there’s a risk they may look to withdraw or reduce business rates reliefs for charities more generally.”
Gift aid payments to charities were static at £1.6bn in the 2024 tax year, with 49% of this being claimed by just 0.3% of all charities that claimed gift aid.
Nick Sladden, partner and head of charities and independent schools at RSM UK, said: “Bigger players in the charity sector continue to attract the bulk of donations and gift aid claimed, but that’s often because they are able to invest in fundraising teams and technology to make donating more accessible for individuals. It’s important not to overlook local charities when considering a donation. The onus is also on smaller charities to review their ways of donating and gift aid systems, so they don’t lose out to larger charities.”
Andrew Robinson added: “The government is keen to promote greater use of gift aid, but to do that, the system must be bought into the 21st century. The current process can be extremely cumbersome, and risks putting people off at the first hurdle. That said, there are a number of UK charity tax reliefs that both charities and individuals ought to be taking greater advantage of; so the focus needs to be on increasing the uptake of existing reliefs and making it easier to access those reliefs, rather than making them more generous.”
