Last week's emergency budget resulted in some direct and indirect consequences for the charity sector as a whole.

The planned VAT increase at the start of next year will affect all charities and is projected to cost the sector some £140m annually, although some relief will be available due to the cancellation of projected National Insurance rises that were planned under the previous government.

Further bad news comes indirectly due to the £1,000 increase to the tax free personal allowance for income tax.  Some 880,000 people will be taken out of the tax system by this measure and consequentially donations will be ineligible for Gift Aid reclaim by charities.  This has widespread problems; the administration burden to notify all donors of this new increase and the risk to the charity that Gift Aid could still be claimed on those affected donations.

However, there is a glimmer of light; the 50% rate of income tax for the highest earners may act as an extra incentive for people to donate.  After the charity and donor have both claimed back the taxes on the donation, only 50% of the money donated has actually come from the donor.

However, it is the lost income from gift aid on these donations, coupled with the intended increases to VAT that may hit the charity hardest.