How Governments Raise Tax Without “Raising Taxes” We keep hearing the same line every election: “We won’t raise Income Tax, VAT or National Insurance.” And technically, that can be true — yet the tax take still goes up year after year. So how do they do it? Simple: not through new rates, but through quiet tweaks, freezes and re-definitions that barely make the headlines.  Let’s lift the lid. 1️⃣ The stealth tax nobody talks about: freezing thresholds When a tax band or allowance stays still while prices and wages rise, more income drifts into higher tax. That’s called fiscal drag, and it’s been the government’s best friend for years. The personal allowance has been frozen at £12,570 since 2021. If it had risen with inflation, it would be around £15,000 by now. That gap quietly pulls millions into the basic rate, and basic-rate earners into the higher-rate band. The same game plays out across benefits, CGT, pensions and VAT thresholds. No rate rise — yet the Exchequer pockets billions. 2️⃣ Shrinking reliefs and allowances Instead of cutting a tax rate, the Chancellor can cut the allowance attached to it. Take dividends: the tax-free allowance has been sliced from £2,000 to £500 . Capital gains allowance? Down from £12,300 to £3,000 . No headlines, just smaller numbers on the same forms — and higher bills for those who notice too late. 3️⃣ Moving the goalposts Rules change. Definitions change. What used to be tax-free gets re-classified. Examples: Company cars now taxed on a more precise CO₂ scale. Salary-sacrifice schemes that once cut NIC bills for gym memberships or tech purchases are now limited to EVs, bikes and pensions. Even the definition of “trivial benefit” has been tightened by guidance rather than legislation. Every tweak adds a few more taxpayers to the pot. 4️⃣ New classes, not new taxes Politicians can keep their “no new tax” promise while still inventing one. Rebadging is a classic move: Apprenticeship Levy, Bank Surcharge, Health & Social Care Levy (since absorbed back into NIC). Now the talk is of NIC on rental income or wider partnership charges — technically “broadening the base”, not increasing a rate. It’s semantics, but effective semantics. 5️⃣ Compliance and digitalisation HMRC’s push for real-time data — MTD for VAT, PAYE integration, eventually MTD for Income Tax — isn’t just about admin. It’s about closing gaps and boosting yield. Every mismatch spotted by software is another pound recovered. They don’t need higher rates when better data does the work. 6️⃣ The optics game Chancellors rarely want to headline a tax rise. Freezes, relief cuts and “fairness reviews” sound dull but feel safer politically. By the time the impact lands, a different Chancellor is usually holding the brief. 🔍 What this means for you and your business Don’t fixate on rates alone — look at thresholds, allowances and definitions. Model your numbers as if everything you earn will creep into the next band sooner than you expect. Keep pension, ISA and dividend strategies under review — they’re easy political targets. And when you hear “no new taxes” on Budget Day, remember: that doesn’t mean no more tax.

A lot of great community projects start informally — a few people, a good idea, and the motivation to make a difference. Over time, though, many groups reach a point where the question comes up: “Should we register as a charity?” There’s no single answer that fits everyone. But understanding the pros, cons, and timing can help you make a confident decision. The Benefits of Registering Gift Aid on donations This is often the main reason groups register. Once you’re a registered charity, you can claim an extra 25p for every £1 donated by UK taxpayers. That’s effectively a 20%+ boost to your fundraising — without asking supporters to give more. Access to funding Many grant bodies, councils, and corporate funders will only work with registered charities. If you’re planning to grow, you’ll eventually find that registration opens doors that would otherwise stay closed. Credibility and trust Adding “Registered Charity No. XXXXX” to your materials signals that you’re accountable and established. It reassures donors, volunteers, and partners that your finances and governance are transparent. Tax and business rate relief Charities don’t usually pay corporation tax on income used for charitable purposes and can receive up to 80% off business rates — a major help if you rent or own premises. Supplier discounts From fundraising platforms to software, energy, and insurance providers, many suppliers offer reduced rates to registered charities. The Trade-Offs More admin Registration means you’ll need to file annual accounts and returns with the Charity Commission . It’s not overly complex, but it does require organisation and consistency. Governance responsibilities Charities must have trustees who oversee activities and finances. They generally can’t be paid, and funds must only be used for charitable purposes — which means less flexibility than an informal setup. Oversight and regulation The Charity Commission has the power to intervene if governance or finances aren’t up to standard. This oversight helps protect donors and beneficiaries, but it also means accountability is higher. Setting up properly You’ll need a constitution, a clear charitable purpose, and a board of trustees. Getting that groundwork right saves headaches later. The Hidden Costs to Be Aware Of Registering can bring new income opportunities — but also some financial responsibilities: Independent Examination (IE) Under £25,000 income – No external review needed; basic accounts are fine. £25,000–£250,000 – An IE is required, but this doesn’t have to be a professional accountant. A volunteer with the right skills often suffices. Over £250,000 – The IE must be done by a qualified accountant. There may be a fee unless you find someone willing to volunteer. Audit threshold Once your income exceeds £1 million , or certain asset/liability levels, you’ll need a full audit. That’s more work and higher cost. Professional services As your charity grows, you might also decide to outsource bookkeeping, payroll, or financial reporting. Gift Aid vs Costs — A Simple Example Here’s a simple way to see how Gift Aid can make a difference. If your group receives £20,000 in donations each year, claiming Gift Aid adds another £5,000 , giving you £25,000 in total . Even if you spent up to £500 on an independent examination, you’d still be around £4,500 to £5,000 better off than staying unregistered. At £50,000 of annual donations, Gift Aid would bring in £12,500 , for a total of £62,500 . With typical examination costs of around £1,000 , that’s an extra £11,500 in available funds. And if donations reach £100,000 , Gift Aid could add £25,000 , bringing your total to £125,000 . Even allowing about £1,500 for professional review costs, you’d still see a net gain of roughly £23,500 . Rough examples, but enough to show that Gift Aid usually outweighs the extra admin. When It Makes Sense to Register ✅ Income over £5,000 Once you pass this threshold, you’re eligible to apply. For many groups, this is where Gift Aid starts to make a real difference. ✅ Mainly donation-funded If your supporters give regularly, Gift Aid can add thousands each year without increasing donations. ✅ Looking to expand Planning to apply for grants, employ staff, or lease a property? Registration is often required to do so. ✅ Wanting structure and accountability Formal status helps clarify who’s responsible for decisions and how funds are used — which reduces the risk of future disputes. When You Might Stay Informal If your group raises less than £5,000 a year and intends to stay small, the admin may not be worth it.  If your income mainly comes from trading — such as selling products or services — the benefits of Gift Aid may not apply. And if your activities are primarily social or recreational rather than charitable, you might not meet the Charity Commission’s definition of a charitable purpose. Bottom Line Registering as a charity can bring credibility, access to funding, and a welcome boost through Gift Aid. But it also adds structure, rules, and a layer of accountability. If your group is growing, r egularly raising over £5,000 , or planning to expand its reach, now’s a good time to explore registration. With a clear constitution and some light-touch financial support, becoming a charity can set you up for long-term impact and sustainability.