MPs have rejected a bid by peers to exempt small charities from legislation to increase employers’ National Insurance contributions.

The amendments to exempt small charities, as well as children’s hospices and GP practices, from the increase, were defeated by 310 votes to 183.

Among those backing the House of Lords amendments is shadow financial secretary Gareth Davies, the Conservative MP for Grantham and Bourne.

“Charities with an income of less than £1 million make up some 95% of registered charities and undertake vital work in all our communities, yet this Chancellor will force charity staff and volunteers across the sector to raise £1.4 billion more to cover this tax rise next year alone,” he said.

“Supporting this Lords amendment would prevent so many services provided by the third sector from being reduced or even removed altogether.”

Meanwhile, Liberal Democrat deputy leader Daisy Cooper, who represents St Albans, said: “The Government will not keep people out of hospitals by levying a tax on the very health and care charities that provide vital services for those who are vulnerable—warm spaces, friendship for the isolated, financial advice, welfare support and social care.”

In rejecting the amendments exchequer secretary James Murray told MPs: “The Government recognise the crucial role that charities play in our society.

“We recognise the need to protect the smallest charities; that is why we have more than doubled the employment allowance to £10,500 pounds, meaning that more than half of businesses, including charities with national insurance liabilities, either gain or will see no change next year.”

He added: “The Government provide wider support for charities via the tax regime; tax reliefs for charities and their donors were worth just over £6 billion in the tax year to April 2024.

“Again, the amendments would put much of the funding that the Bill seeks to raise for public services at risk, so supporting these amendments is support for higher borrowing, lower spending or other tax rises.”

The House of Lords debate on the government’s National Insurance Contributions (Secondary Class 1 Contributions) Bill in February saw peers back the amendment put forward by Conservative peer Baroness Neville Rolfe to exempt charities with an annual revenue of less than £1m.

Challenges facing charities due to the hike include losing jobs and skills, said Neville-Rolf during this upper house debate.

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