Policy paper

VAT relief for business donations on goods to charities

Published 26 November 2025

Who is likely to be affected

Businesses that donate goods to registered charities are directly affected as they will benefit from the relief.

The charities themselves will also be affected, albeit indirectly, as the aim of the measure is to increase the volume of donations.

General description of the measure

This measure introduces a new VAT relief for businesses that donate goods to charities.

The relief removes the requirement for businesses to account for VAT on eligible goods that are donated for onward distribution or use in a charity or eligible organisation’s services.

Value limits will apply to donated items to safeguard against misuse, with higher limits available for listed goods.

Policy objective

This measure encourages charitable giving by making it simpler and more cost-effective for businesses to donate goods to charitable causes, helping ensure that surplus items are put to good use rather than going to waste.

It supports a fairer tax system and the work of charities delivering essential services, while contributing to the government’s wider ambition for a more sustainable, circular economy.

Background to the measure

In Spring 2025 the government announced its intention to consult on a targeted VAT relief for business donations of goods to charity.

The public consultation on the design and operation of the relief was published in April 2025 and ran for 12 weeks, closing in July 2025. The consultation sought views from businesses, charities, and other stakeholders on the scope, eligibility and administration of the proposed relief, as well as safeguards against misuse.

Following careful consideration of the responses, the government confirmed its approach and will legislate for the relief in Finance Bill 2025-26.

Detailed proposal

Operative date

This measure will take effect on 1 April 2026.

Current law

Current law is contained in Schedule 4 and Schedule 6 of the Value Added Tax Act 1994, which set out the rules for business gifts and the valuation of deemed supplies. Related provisions include Schedule 8, Group 15, Item 2 of the Value Added Tax Act 1994, which applies a zero rate to donations of goods to charity for onward sale.

Proposed revisions

Legislation will amend Schedule 4 of the Value Added Tax Act 1994 to introduce a new exception to the deemed supply rules for business goods donated free of charge to charities. Where eligible goods are donated for onward distribution to people in need or for use in the charity’s services, businesses will not be required to account for VAT on those items.

The relief will apply to goods within defined per-item value limits, set out in the legislation, with a higher threshold for specified goods such as technology and household appliances. Certain goods subject to excise duty will be excluded from the scope of the relief. The legislation will also provide for a power to uplift value limits, and for amendment of the list of goods eligible for higher thresholds.

The new provisions will be included in Finance Bill 2025-26, with further detail to be set out in HMRC guidance as necessary.

Summary of impacts

Exchequer impact (£ million)

2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031
—	-10	-10	-10	-10	-10

There figures are set out in Table 4.1 of Budget 2025 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2025.

Macroeconomic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure is not expected to directly impact individuals. There will be an indirect benefit for individuals and families who rely on charities for household goods, as the measure is designed to increase donations from businesses.

The measure is not expected to impact family formation, stability or breakdown. It is expected overall to have no impact on individuals’ experience of dealing with HMRC.

Equalities impacts

An individual may be affected by this measure regardless of their protected characteristics. This measure may indirectly benefit individuals who rely on charities for household goods.

HMRC does not currently hold data on the protected characteristics of individuals impacted by this measure and so cannot make an assessment of the impacts on those with shared protected characteristics.

Administrative impact on business including civil society organisations

This measure will have a negligible impact on businesses that donate to charities, and the organisations receiving such donations. It will apply to all businesses that wish to donate goods, and donations can be received by any registered charity. This is consistent with existing charity reliefs.

One-off costs will include familiarisation with the measure. Continuing savings will include no longer having to calculate or pay VAT on eligible donations. Businesses will continue to maintain records on donated goods as they do now. Continuing costs will include the need to confirm the bona fides of the recipient charity, typically certified by the charity itself.

This measure is expected overall to impact businesses’ experience of dealing with HMRC as it will reduce the administration involved in donating eligible goods.

There will be an indirect benefit for charities and other civil society organisations that are expected to benefit from increased donations, supporting them in expanding their non-business charitable activities.

Operational impact (£ million) (HMRC or other)

HMRC will not incur any extra costs implementing this change.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

Consideration will be given to monitoring or evaluating business’ compliance with and understanding of the policy and impact on volume of charitable donations after monitoring data has been analysed and collected.

Further advice

If you have any questions about this change, contact David Webb by telephone on 03000 585994 or email david.webb@hmrc.gov.uk.