Lynn Tulloch of Voluntary Action Shetland spoke out about the plans

The executive officer of a Scottish third sector interface (TSI) has hit out at the Chancellor’s planned hike in National Insurance (NI) contributions, warning of “significant financial challenges” for charities.

Voluntary Action Shetland (VAS) represents third sector groups across the islands, but has said their members are facing “uncertainty” as a result of the proposed NI rises for employers. 

At the moment, employers pay a rate of 13.8% on employees' earnings above a threshold of £9,100 a year. 

In the Budget, Chancellor Rachel Reeves said this rate would increase to 15% in April 2025, and the threshold would be reduced to £5,000.

In order to help the smallest businesses, the employment allowance - which allows companies to reduce their National Insurance liability - will increase from £5,000 to £10,500.

While smaller organisations will be supported by the welcome increase in Employment Allowance, other voluntary sector employers will be significantly impacted by these changes.

Whilst Scotland has received an additional £3.4bn and it would feel that budgets for Scotland are moving in the right direction with an air of optimism, the increase of National Insurance Contributions will still hit charities, VAS said. 

The TSI said they are looking to see how key responses throughout the Third Sector can help to alter this course.

Executive Officer Lynn Tulloch said: “Local Charities and Voluntary Organisations are facing uncertainty and future significant financial challenges with stand still budgets, having difficulties in sourcing core funding, working with yearly grants with no guarantee of future funding and having to look at supporting on-going activity with their reserves/self-generated funding to continue to operate at their current level.”