Charity sector income decreases for the first time since 2013

New research has found that charity sector income in the UK has shrunk for the first time in eight years for the 2020/21 tax year. It is thought that smaller charities have been affected the most due to the impact of the pandemic.

The UK Civil Society Almanac 2023 has found that there has been a 14% decline in donations from the general public, a 15% decline in investment income and an increase in government income of 6% which led to an overall decrease of 3% in 2020-21 (£58.7bn) compared to 2019-20 (£56.9bn). This was the first time that income decreased for the UK charity sector in eight years with the pandemic thought to be the main contributor of the decrease.

Smaller charities are disproportionately affected

Smaller charities were disproportionately affected compared to larger charities. For example, charities with an income of less than £1m saw their funding decrease by £4.6bn compared to larger charities (income of more than £10m) who saw their funding increase by £4.5bn. Furthermore, the number of charities that achieved an income of more than £10m decreased for the first time in 2020-21 from 846 to 804.

According to the UK Civil Society Almanac 2023 small and micro charities represent 80.34% of all voluntary organisations in the UK. Despite this, their income only represents 3.6% of the sector’s total income. In 2019/20 their income was £2.3bn compared to £2bn in 2020/21. These small and micro charities all have an income of less than £100,000 per year. These statistics demonstrate how smaller charities have been disproportionately affected by the pandemic. This is perhaps because larger charities had the infrastructure in place to adapt to the pandemic quicker than smaller charities who were left struggling. They are also more likely to have reserves and contingencies in place to help them weather the storm and in many cases more readily available to access emergency funding.

How can we help?

At Hawsons our accountants recognise that not-for-profit organisations have very different requirements from other businesses and are currently exposed to a challenging economic climate.

Our dedicated team of charity accountants fully understands the complex, ever-changing regulatory requirements of the charity and not-for-profit sector. Irrespective of your size we wish to support you to maximise the benefits you could achieve through our specialist professional advice.

Charities & not-for-profit organisations are currently facing extensive changes in their regulatory and legal framework. Given the additional pressures on fundraising, complex tax regimes, internal risk exposure, and stakeholder demands, it has never been more important to obtain specialist professional advice.