Finance trends for 2025

Our crystal ball for the upcoming year is predicting a more benign year than previously thought. Taking a look at the overall picture and specific charity finance trends, we tackle what to be prepared for. 

What’s the outlook?  

This year has been challenging due to the cost-of-living crisis and how that’s had an impact on people’s ability to give. Not only have prices been rising, but so have borrowing rates. The double whammy of high prices and constrained borrowing means less discretionary income.  

For 2025, the outlook looks to be more benign. Accounting firm KPMG shares a slightly positive view. They expect the Bank of England to cut reference rates down to around 3% by the end of next year. The projections for households are also positive. KPMG sees that with mortgage rates and National Insurance costs decreasing, households will have more disposable income.  

Increased visibility on impact  

Donor preferences are changing. They are demanding greater visibility, and this has the potential to create competition.  

Visibility and transparency are tantamount. Donors need to see exactly how their funds are spent, as this grows trust. Finance plays a huge role in tracking where funds were spent. Digital tools and platforms are critical. Platforms, as mentioned, take the brunt of the work away. However, on the horizon are cryptocurrency technologies which allows donors and charities to faithfully record specific transaction details.  

The rise of DAFs 

Donor advised funds (DAFs) are also on the rise and potentially, may introduce competitive comparisons between charitable causes. The National Philanthropic Trust UK (NPT UK) is an organisation that offers DAF “investment” vehicles. DAFs house donor funds then make donations to causes that are aligned with the investment strategy. Charities may be compared side-by-side from a return-on-investment and impact perspective.  

Despite the potential drawbacks for charities, in general, this type of giving is increasing. NPT reports that the growth has been meteoric. In their annual report, DAF giving increased 37% between 2021-2022. The Charities Aid Foundation’s report on DAFs noted a similar trajectory. They share that this type of giving reached £868.5 million in 2022, approximately 7% of total giving in the UK.  

Legacies are still critical to income 

A positive financial trend is the growth in legacy giving. UK Fundraising reports on the developments. This type of giving has grown by 7% in terms of numbers of donations with the total raised increasing by 1%. 

The rationale behind this income growth aligns with the overall financial trends. Civil Society offers a more nuanced view. They say that the time taken to process probate and fluctuating house prices impact legacies disproportionately. The probate process is administration-heavy, and many decisions may be delayed, resulting in legacy income paid later. House prices, part of major gifts, change with valuations. As house prices come off, legacy total values move down.  

However, when looking at the overall picture, Civil Society sees a rebound in 2026. By 2050, the analysts forecast that giving will hit the £6 billion mark.  

With great power comes more responsibility 

There are already great expectations thrust upon those with control of the purse strings. Looking ahead, the expectation to do more with less will not change. While the CFO might reap benefits from automation, there may be more demands on their time.  

The CFO now stands as someone who not only speaks about financial performance, but can drive many other operational workstreams, including ESG and sustainability. For 2025, we expect this trend to be even more pervasive, with the charity finance function controlling budgets, measuring impact, and reporting.   

Finance function will continue to digitise 

Of no surprise is that the charity finance function will continue to digitise from a process and payments perspective.  

Platforms will be critical to driving efficiencies. The best financial management platforms take into consideration what the core gripes are. From a reporting perspective, the three main statements are produced reliably, along with analysis. Platforms also make easy work out of bank account reconciliations.  

In 2025, we expect the finance function to digitise even further. This may include more advanced functionality, like AI. Just on the brink of mass deployment, AI in charity finance may support data mining, trend analysis, and real-time predictions. The function will no longer be backwards looking, but forward.  

Oracle, the software company, sums up the transformation. They observe that: “the future of the finance function looks more analysis-driven and strategic, with finance teams working across the organisation to share insights that create value for the business.”