Levy review: response

Proposed funding model from our review 

Each year there are around 2,000 charities covered by the levy. The levy would increase for everyone, but the more a charity spends on fundraising, the higher that percentage increase would be. Conversely, the less a charity spends on fundraising, the lower it would be.

So, for example, a charity spending over £50 million on fundraising would be asked to pay £22,500, one spending up to £1.1million would pay £3,250, and one spending up to £350,000 would pay £600. Those in the lowest levy band would see their fee increase from £150 to £180. This means the highest-spending charities’ levy payment would rise by 50%, medium-spending charities’ levy payment by 30%, and lower-spending charities’ (which make up the majority of those registered with us) by 20%. 

If we had raised rates in line with the Consumer Price Index (CPI) since 2016 the levy would currently be 25% higher for everyone. 

Under this system, the top 327 registered charities would have paid a greater proportion of the entire levy. We believed this to be the fairest way to spread the cost. 

We also introduced two extra bands so that the rise in levy payments would be more gradual as charities move up the payment scale. 

Overall, the levy still represented a fraction of a percentage of a charity’s total fundraising expenditure. In addition, it represented an even smaller percentage of a charity’s income from donations (donated income for the top 10 largest levy paying charities in 2021/22 totalled £2.376 billion and ranged from £27 million to £426 million). 

From September 2025, we intended to increase the levy by CPI each year so that future rises were more gradual, and we would let levy payers know what these will be in advance. 

The levy would have also increased for commercial fundraisers and exempt charities (for example, universities in England). 

Small charity registration 

We proposed to increase the administration fee for small charity registration from £50 to £60 to reflect a rise in our processing costs since 2016.  We would review the fee from time to time in the future, but it would not be subject to annual CPI increases to make it simple to administer.     

Why we need to increase the levy 

Proactive regulation 

In our Strategic Plan 2022-2027 we reaffirmed our commitment to being a pro-active regulator. With this in mind, we are currently reviewing the Code of Fundraising Practice to take into account, among other things, the effect of new developments on the sector and fundraising in particular. We wanted to make sure we have adequate funding to continue to advise, support and regulate the sector during these changing times (for example through market inquiries) and we recognised that at the moment fundraising is much harder than it has been for a while. 

Our Strategic Plan also sees us engaging more actively with the charities we regulate through increased capacity to learn from charity fundraising experience and share our own learning. For example, by undertaking wider inquiries or carrying out research into aspects of fundraising which will be of benefit to charities and those they work with.  

We have already started this work with the market inquiry we announced in October 2023 into how charities use contracts and sub-contracts to deliver their fundraising strategies and some commissioned research into how the public views fundraising.  

Caseload 

As public awareness of the regulator has grown, so had our casework. Our 2020/21 annual report found that our caseload had increased by 26% over the previous two years. In addition, as fundraising methods change and more fundraising happens online, our small team has dealt with an increasing number of complex cases and sensitive issues of public concern. We wanted to make sure we have enough resources to support this work. 

Online fundraising 

There had been a significant rise in digital fundraising since the Fundraising Regulator was established in 2016. The ongoing growth of fundraising platforms, contactless giving and social media fundraising requires new regulatory responses and increased levels of partnership working with the sector to ensure public protection and accountability in this rapidly evolving landscape. 

Economic climate 

As you will know, the economic situation has continued to be challenging. As with the rest of the country over the last year, our running costs have been affected by unexpected inflation of over 10%. 

Alternative ways of meeting our costs 

As part of our commitment to providing value for money, we considered a variety of ways of supporting our work that didn’t involve increasing the levy. 

These included: 

Use of reserves 

For the current financial year, we are running at a deficit using funds from our reserves. However, this is only sustainable for a maximum of two years before our reserves fall below a safe, minimum level of around six months of running costs. It is therefore not a long-term solution.  

We keep a reserve fund of around £1.5million to cover around six months of operating costs. The balance of our current reserves (around £500k) is held in order to support legal costs in case any of our decisions are challenged in court. As a voluntary regulator we are limited in the legal insurance cover we can rely on. 

Making savings 

In 2021/22, we made savings by cutting the cost of the Fundraising Preference Service from £260,000 to £148,000 a year, a percentage reduction of 42.5%. However, we believed the scope for us to make further spending reductions through efficiency savings is limited. We have a small team of around 30 people and benchmark pay rates against a range of other bodies in the regulatory, public and charity sectors. This is carried out by independent specialists. In the last few years, we have moved to a more flexible way of working with fewer desks in an office to reduce the cost of accommodation. All this with a view to making sure we provide good value for money. 

Relying on growth of fundraising expenditure 

While we thought that inflation is likely to increase fundraising expenditure and therefore levy payments over the next few financial years, we considered that these increases would be slow. Unfortunately, the growth of fundraising expenditure is unlikely to provide the additional funding we needed to enable us to remain an effective regulator.  

We asked respondents whether they considered the proposed levy changes appropriate. 

222 organisations responded to question 1 (3.5% of all organisations registered with the Fundraising Regulator). 113 (51%) expressed support for the proposed changes, while 109 (49%) opposed our proposals. 73 levy paying organisations (70% of respondents in this category) were opposed to our plans, representing 3.6% of all current levy payers. The majority of small charity respondents (around 70%) were in favour of the proposed changes.

*Note: 'Other' relates to two non-charities and two organisations not registered with the Fundraising Regulator.

Key reasons for opposing the proposed levy changes 

Many respondents acknowledged that the Fundraising Regulator has not increased the levy since 2016 and expressed sympathy with the need to cover the rising costs of delivering regulation. However, those that answered ‘no’ to question 1 cited the following factors for opposing the proposed changes:  

Economic environment 

60 respondents (55% of all those who answered ‘no’ to question 1) highlighted the unfavourable economic environment as being an impediment to the proposed levy changes. This included 43 levy payers. Respondents highlighted such factors as reduced statutory funding, rising costs, the public having less disposable income for donations, and increased demand on services as barriers to affordability.  

One membership body noted how the levy represents “another difficult challenge” for fundraising charities, particularly those who are looking to invest in fundraising as a response to a difficult funding environment elsewhere. They recommended that the Fundraising Regulator consider a lower one-off increase or staggering the increase over several years to allow charities to more easily plan for, and absorb, the increase.  

Another membership body noted that to adapt to rising costs brought on by inflation, many charities have chosen to stop areas of work to make savings and drive efficiencies. They questioned whether there is scope for the Fundraising Regulator to do the same, reducing the need for the proposed increase to the levy.   

Proportionality 

41 respondents (38% of all those who answered ‘no’ to question 1) questioned the proportionality of the proposed levy changes. Some suggested that the proposed changes are excessive and particularly disproportionate at a time when charities are facing significant financial struggles. Objections were particularly marked in bands 1-3, where a 50% increase is proposed, with some respondents suggesting this is a particularly challenging increase to impose in a single year. Others disagreed that the increase should be greater for larger charities and noted that it would be fairer to ask all charities to pay the same proportion of their fundraising expenditure. 

Value for money 

33 respondents (30% of all those who answered ‘no’ to question 1) highlighted value for money in their submissions. Some respondents requested greater clarity on the benefits to the sector of the proposed increases and more transparency on how the additional funds will be used. One membership body asked for greater clarity on the current approach to caseloads and why they are increasing. Several respondents questioned the value for money the Fundraising Regulator currently provides.  

Timing and implementation 

25 respondents (23% of all those who answered ‘no’ to question 1) questioned the timetable for implementing the proposed levy changes. Some noted that many organisations’ budgets are already set for 2024, suggesting instead that it would be more appropriate to apply any increase from 2025. Others advocated a phased introduction of the new regime to allow charities transitional time to build the funding expectation into budgets. 

Impact on beneficiaries 

13 respondents (12% of all those who answered ‘no’ to question 1) remarked how the proposed changes would negatively impact their beneficiaries. They suggested that any additional fees paid to the Fundraising Regulator would come directly from funds that might otherwise have been spent on charitable activities. Some noted that their donors would not be happy about this, expecting instead that their donations would be spent on charitable activities rather than regulation.  

Other comments related to question 1 

In addition to the above themes, respondents commented on the following issues: 

• Several respondents suggested that the Fundraising Regulator should do more to onboard charities who are not paying the levy, thereby reducing the burden on charities who are already contributing.
• Several respondents – mainly larger charities - remarked on the apparent lack of oversight of commercial organisations operating in the fundraising space and how they should pay a fair and proportionate fee relative to the regulatory work their activities require. Online platforms, in particular, were singled out in this respect. 
• Several respondents requested more clarity on how any planned increases for commercial fundraisers and exempt charities (for example, universities) will be calculated. 
• One membership body noted that some of their members feel the Fundraising Regulator is moving outside of its remit by attempting to regulate artificial intelligence (AI). 

A large majority (77%) of the 218 respondents who answered question 2 agreed that it is reasonable that levy payments for larger charities should increase by a higher percentage than for smaller charities. The proposal had more support amongst small charity respondents (87%) compared to levy paying respondents (65%).  

Note: ‘Other’ relates to two non-charities and two organisations not registered with the Fundraising Regulator.  

The 50 respondents who answered ‘no’ to question 2 gave various reasons for opposing the higher percentages for larger charities. Some remarked that all charities are experiencing a downturn due to the current financial situation and that costs for large and small charities are increasing at a similar level. A few respondents suggested that the levy should be a flat rate and that large charities should not subsidise the regulation of others. A couple of respondents suggested it would be fairer to ask all charities to pay the same proportion of their expenditure as opposed to expecting larger charities to shoulder the burden.  

One membership body remarked that while some of its members appreciate that it is their responsibility to underwrite the cost of the levy for smaller organisations, others were not comfortable with taking on a higher percentage for the reasons outlined in response to question 1. 

Just over half (56%) of the 216 respondents who answered question 3 disagreed that future increases in the levy from September 2025 should be linked to the Consumer Price Index (CPI), with opposition rising to 70% amongst levy payers.  

Note: ‘Other’ relates to two non-charities and two organisations not registered with the Fundraising Regulator. 

Some respondents agreed that linking the levy to an index would make it easier for charities to anticipate future increases and plan accordingly. However, many suggested that a CPI-linked rise was too arbitrary, suggesting instead that the levy should be based on an assessment of the financial environment within which UK charities operate and the costs of delivering regulation.  

Several respondents highlighted the financial pressures charities are currently facing, noting that a high CPI rate could result in charities facing very high levy fees at a time when other costs are increasing, services are under pressure, and funding sources are uncertain. Others remarked that a CPI-linked rise would be most challenging for small charities to handle. Two respondents claimed some charities will need to forgo registering or renewing in the event of a CPI-linked rise each year. 

Several respondents called for future consultations with fundraisers and the wider charitable sector to fully understand the impact on charities, and where a clear rationale validating levy and registration costs could be provided. Others suggested a capped annual increase as an alternative option.   

A large majority (72%) of the 215 respondents who answered question 4 agreed that the proposed increase in the registration fee – from £50 to £60 – is appropriate, with a minimal difference between levy payers (71%) and small charities (73%).  

Note: ‘Other’ relates to two non-charities and two organisations not registered with the Fundraising Regulator. 

The 61 respondents who answered ‘no’ to question 4 gave various reasons for opposing the proposed registration fee increase. Several remarked that a 20% increase was disproportionate, noting how it could have a negative impact on the budget of small charities who are already struggling. A few respondents questioned the value for money of registration, while others suggested that there should be no charge at all for using the badge. Two respondents suggested that registration should instead be free or minimal for charities who are very small.