New VAT relief to boost business donations to charities from April 2026

A new UK government policy has removed VAT costs on certain goods donated by businesses to charities, in a move designed to encourage giving, reduce waste and support communities.

The measure, introduced by HM Revenue & Customs, came into force on 1 April 2026 and removes the requirement for businesses to account for VAT on eligible goods donated to registered charities.

What is changing?

Under previous VAT rules, businesses faced a tax charge when donating goods that are not intended for resale by charities. The new relief addresses this by allowing qualifying donations to be made without triggering a VAT liability, whether the goods are used directly by charities or distributed to beneficiaries.

This effectively removes what has been described as a long-standing barrier to charitable giving, where donating goods could previously cost businesses up to 20% in VAT.

Key details of the relief

• Applies to goods donated to registered charities
• Covers items used in charitable services or given directly to those in need
• Introduces value thresholds to prevent misuse
  • Around £100 per item for most goods
  • Up to £200 for essential items such as electronics and household goods 
• Certain goods, such as those subject to excise duty, are excluded 

There is no limit on the number of goods that can be donated, provided they meet eligibility criteria.

Why it matters

The policy aims to make it easier and more cost-effective for businesses to donate surplus stock, supporting both charities and sustainability goals. By removing VAT as a disincentive, the government hopes to increase the volume of donations and ensure usable goods are not wasted.

It also aligns with wider ambitions to promote a circular economy, reduce landfill, and strengthen support for organisations delivering essential services.

Impact on businesses and charities

For businesses, the change simplifies compliance and removes a financial barrier to donating stock. For charities, it is expected to lead to an increase in available goods, particularly items that can be used directly in services such as shelters, food banks and community programmes.

However, businesses will still need to maintain records of donations and ensure recipients are registered charities to qualify for the relief.

Looking ahead

Following consultation in 2025, the measure will be legislated through the Finance Bill 2025–26.

The reform is widely seen as a practical step toward removing inefficiencies in the tax system—making it easier for businesses to do good while supporting communities and reducing waste.

Find out more: VAT relief for business donations on goods to charities - GOV.UK