The planned uplift in employer National Insurance contributions could cost the voluntary sector £1.4bn a year, the National Council for Voluntary Organisations has estimated.
Charity membership bodies are spearheading an open letter to the government calling for charities to be given the same treatment as public sector bodies, which will be reimbursed for the additional cost.
The NCVO said the change was the biggest shock to the sector since the Covid-19 pandemic.
In her Budget speech on Wednesday, Rachel Reeves, the Chancellor of the Exchequer, announced a 1.2 percentage point rise in employer NI contributions from April.
Initial estimates put the cost to the sector at £800m a year but the NCVO has calculated a far higher figure and is urging the government to act.
In a joint statement with the charity leaders body Acevo, which is working with the NCVO on the letter, the organisations said charities of all sizes would feel the effects of the NI changes and would have less flexibility than usual to absorb the costs because of already challenging operating conditions.
“Many charities will be forced to make difficult choices in the coming months as a result of the planned increases – including reducing staff, cutting salaries and, most worryingly, scaling back or suspending services, which could leave the people and communities they support at greater risk,” the two organisations said.
Sarah Elliott, chief executive of the NCVO, said the changes represented “the biggest shock to the sector since the pandemic”.
She said: “Charities across the country are already in a dire situation, juggling a triple threat of rising demand, escalating costs and falling funding.
“This additional cost, for which there is no headroom in budgets to cover, will be devastating. “Addressing these concerns is vital to ensuring charities can continue to deliver vital services to the people and communities that rely on them.”
Jane Ide, chief executive of Acevo, said the NI changes were causing “great concern for sector leaders who have limited choices in how to ensure their operations adapt to absorb the impact”.
Chris Sherwood, chief executive of the RSPCA, said the changes could cost his charity more than £1m a year.
He said: “The charitable sector already delivers vital services – utilising its expertise and resources to help people and animals alike – which often takes strain away from the public purse.
“But failure to provide exemptions or allowances for charities when implementing these employer National Insurance hikes risks placing additional pressure on what is already a challenging financial backdrop for so many charities; and could end up costing the taxpayer more if charitable services are cut.”
The Treasury has been contacted for comment.
