What's in store for the charity sector in 2025?
Happy new year! We have rounded up the predictions of our exceptional professional support lawyers from across the firm, from straight charity law to major changes in employment law and pensions. We hope you had a wonderful break and this blog helps you get 2025 off to a great start. Expand the boxes below to explore the areas relevant to you.
What's on the horizon?
No significant legislative changes are on the horizon in charity law in 2025. However, there are a number of changes coming up that will affect all charities.
Charities Act
At the time of writing, the significant changes to the rules on making ex gratia payments have still not been brought into force. The changes, contained in the Charities Act 2022, were delayed for further consideration of the impact on significant national collections and historical assets – you can read about the changes in our blog. We will make sure to update you if they are implemented.
Code of Fundraising Practice
The extensively reviewed Code of Fundraising Practice is being ‘soft launched’ in April. There will be a 6 month implementation period where complaints will be judged against both the old and new codes. The changes are covered in our blog.
Charity Governance Code
A revised Charity Governance Code is due in early 2025. The steering group recommends not delaying any governance review pending publication.
Private school charities
VAT was applied to private education and boarding school fees on 1 January 2025. Business rates charitable relief will be removed from private schools on 1 April 2025.
Civil Society Covenant
Finally, we expect progress on the new Civil Society Covenant, following a consultation period ending in December 2024. The government wishes to “reset the relationship with civil society and build a new partnership that can harness civil society’s full potential to rebuild our country and deliver against the government’s 5 missions”.
For more information please contact Neil Burton or Sarah Williams.
The stand-out event of 2024 was the publication of the Employment Rights Bill 2024. Even partially implemented, this would represent the biggest shake-up of employment law in Britain for a generation. Key measures include introducing a statutory probationary period during which a light-touch unfair dismissal regime would apply and developing much stricter protection for workers on zero-hours contracts and similar arrangements. The Bill is also the vehicle for repealing most of the trade union legislation introduced by our last Government, and will create a more integrated framework for enforcing some basic employment rights. The Government has committed to consulting fully on these changes, most of which will not come into effect before autumn 2026.
In 2024 there has been a couple of cases examining the status of volunteers – for more information see our blog or get in touch with David Mills.
Charities with defined benefit (DB) pension schemes may have some funding-related issues to consider in 2025.
DB funding regime
The DB funding regime changed this year, and applies to relevant pension scheme valuations with an effective date on or after 22 September 2024. Changes include a requirement for a funding and investment strategy, which will generally need to be agreed between the employer and the pension trustees/managers, and a legislated role for employer covenants within the funding regime. Charities with DB schemes should make sure they understand how the changes affect them, and might wish to liaise with their pension trustees to plan adequate time for the charity’s input where applicable.
Surplus
If a charity has a DB scheme in surplus, there might be a role for the charity in deciding how to deal with the surplus. Even if the charity does not have a formal decision-making role under the pension scheme rules, there may still be an opportunity to work with the pension trustees towards the scheme’s end game.
Scheme amendments
The recent case of Virgin Media v NTL Pension Trustees II cast a spotlight on whether past scheme amendments were validly made. Charities should keep a watching brief on developments if their pension scheme was formerly a contracted-out salary-related scheme, as we are expecting a further case on the issue in 2025.
2025 looks set to be one of the biggest years for change in property related legislation since the Land Registration Act 2002.
In terms of charity specific property legislation, the changes to be implemented by the Charities Act 2022 to the University and Colleges Estates Acts (UCEA) are ones to note. 19 May 2025 heralds the repeal of the complex scheme of powers to effect land transactions granted under UCEA to the charities affected by those Acts (which include Oxbridge and Durham colleges and halls and Eton and Winchester Colleges) and its replacement with a simplified scheme confirming that those charities have all the powers to effect land transactions of an absolute property owner, subject (among other things) to any other statutory restrictions on such transactions, including the restrictions imposed on disposals by non-exempt charities by the Charities Act 2011. The impact of this change for many Oxbridge colleges will, however, be limited where they can instead rely on their inherent charter powers and where they have Statutory authority to enter into land disposals that provides exemption from section 117(1) of the Charities Act 2011.
In wider property changes, the introduction of the Building Safety Act 2022 continues to have far-reaching implications for all tall buildings with a residential element and we anticipate that further legislation will be brought in by the Government in the coming year to extend the reach of the Act. 2025 also sees a number of Government consultations: notably a consultation on changes to one of the cornerstone Acts of property law – the Landlord and Tenant Act 1954 - and its regime of offering security of tenure to leasehold tenants of commercial premises, together with a consultation on the energy performance of buildings regime that will have implications the wider property sector as a whole including charities that hold property.
The Government is looking to reform the planning system to “get Britain building” with a reform of the National Planning Policy Framework and the Planning Committee system. The changes to the NPPF impact green belt policy and policy on establishing housing need and housing land supply. There is also greater policy support for infrastructure and community facilities, among other changes. The focus on housing continues with the Renters Rights Bill and the changes to be implemented following the enactment of the Leasehold and Freehold Reform Act 2024 – these will be of interest to social housing charities in particular. The implementation of High Street Rental Auctions may give charities the opportunity to obtain short-term High-Street retail presence.”
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) is the second part of a legislative package to prevent the abuse of UK corporate structures and to tackle economic crime.
ECCTA makes changes to the information required and processes involved in incorporating and operating a company in the UK. Although it became law in October 2023, it is being implemented in stages and some further legislation needs to be passed and new Companies House systems put in place before some of the more onerous reforms can go live.
Forthcoming changes to be made by the Act include, amongst other things:
- The introduction of new identity verification requirements for all new and existing directors and PSCs (individual registrable PSCs and a relevant officer of a registrable RLE (relevant legal entity) will need their identity verified);
- The introduction of a new process for companies to file documents at Companies House. Filings will be submitted on behalf of companies by either an officer or employee of the company (whose identity has been verified), or by an Authorised Corporate Service Provider (ACSP) (such as a professional services firm who has registered as an ACSP at Companies House);
- Changes to the accounts filing requirements for:
- micro-entities which, unless exempt from audit, will be required to file a balance sheet and profit and loss account; and
- small companies which will be required to file annual accounts and a directors' report. Small companies no longer be able to file abridged or filleted accounts.
The timing for implementation of these changes has not yet been determined, but it is expected that a transition period will be required for the establishment of the structures and services needed for Companies House to operate the new verification regime.
Failure to Prevent Fraud
Significantly, ECCTA introduces new corporate criminal offences including the Failure to Prevent Fraud offence which comes into force on 1 September 2025. This offence is intended to hold large organisations (including charitable companies, charitable incorporated organisations and charities established by Royal Charter and Statute) to account if a person (such as an employee, agent or subsidiary of the company) associated with the organisation commits a specified fraud offence. For the purpose of the offence, ‘large organisations’ is defined as those meeting at least two of the following criteria: (i) a turnover exceeding £36 million; (ii) a balance sheet total over £18 million; and (iii) more than 250 employees.
It was widely expected that new government’s Data (Use and Access) Bill would change the law on direct marketing for charities. The previous incarnation of the legislation – which was almost passed under the last government – contained a provision that would have allowed charities to rely on a soft opt-in exemption to send individuals promotional emails and text messages without obtaining their explicit consent. This provision is conspicuous by its absence in the first draft of the Data (Use and Access) Bill. Charities disappointed at this omission may wish to lobby for the soft opt-in exemption to be reinstated. It is also worth keeping a weather eye out for the forthcoming Cyber-Security & Resilience Bill. This legislation is set to impose strict compliance obligations on organisations operating in certain sectors, in the interests of preventing damaging cybersecurity breaches, such as the ransomware attack that continues to disrupt online services at the British Library. When the new law is published, it is worth checking it will apply to the sector in which your charity operates.
The 2024 Autumn Budget has introduced several significant changes to inheritance tax that could impact charitable giving in the long term. Starting from 6 April 2027, unused pension pots will be treated as part of the member’s estate for inheritance tax purposes. However, if these benefits are passed to an ‘exempt’ beneficiary—such as a spouse, civil partner, or charity—they will remain free from inheritance tax.
For members who pass away after the age of 75, recipients will also need to pay income tax at their marginal rates to access these funds. Although pension trustees still have discretion over the distribution of death benefits, this change might influence who members nominate as beneficiaries in the coming years. Previously, pension pots were often used tax-efficiently for the benefit of the ‘next generation.’ Now, for those over 75 without a spouse or civil partner, it might be more advantageous to allocate these funds to charities, potentially mitigating a combined tax charge of up to 67%. In the past, pension pots were perhaps less likely to be donated to charity, as greater benefits could be achieved by making provision through the ‘free estate’ or relevant trusts.
From 6 April 2026, agricultural and business assets will face higher inheritance tax charges. To mitigate this, it will remain attractive in some circumstances to reduce the overall inheritance tax rate from 40% to 36% (for unrelievable assets) by donating at least 10% of the relevant ‘pots’ to a qualifying UK charity. It will be interesting to see whether pension death benefits are a new type of ‘pot’ for these purposes.
Finally, it is anticipated that the overall changes will necessitate a need for families to consider their succession strategy at an early stage, with timely lifetime gifts and a defined ‘plan’ becoming more important than ever. This considered approach (particularly if it involves younger generations) may include philanthropic aims as one of the central considerations.
Major UK Providers of Residential Care
Many of these are third sector and affected by the topics flagged elsewhere in this newsletter such as the recent National Insurance Increase, the Employment Rights Bill, the new Procurement Act and recommendations from the Grenfell Inquiry on Building Safety. This is on top of sector specific issues such as CQC regulation, the Health and Social Care’s Committee Inquiry into Social Care. Further information can be found in our blog.
If you have any questions please get in touch with Jill Mason.