Labour hits nation’s churches with ‘shameless stealth tax’
Labour has been warned of the challenge churches face paying for repairs (Image: Manchester Evening News)
Labour has been accused of imposing a “shameless stealth tax” on historic churches after the closure of a Government scheme that allowed places of worship to reclaim VAT on essential repairs.
The controversy centres on the replacement of the Listed Places of Worship Grant Scheme with a new funding programme designed to support repairs and improvements to historic religious buildings. Critics argue that, although the new fund offers substantial financial assistance, it does not provide the same straightforward VAT rebate that churches previously relied upon.
The Liberal Democrats have warned that some churches could face repair bills running into tens of thousands of pounds, raising concerns about whether smaller congregations will be able to keep ageing buildings safe and open to the public.
The dispute has placed renewed pressure on the Labour Government to explain how it intends to protect the country’s religious heritage while ensuring that communities do not lose access to buildings that serve purposes far beyond Sunday worship.
For many villages and towns, churches are among the oldest buildings in the area. They can host food banks, community lunches, parent-and-toddler groups, local meetings and support services for vulnerable residents. If a roof begins to leak or a tower becomes structurally unsafe, the consequences can extend well beyond the congregation itself.
Liberal Democrats accuse Labour of a ‘stealth tax’
Anna Sabine, the Liberal Democrats’ culture spokesperson, has strongly criticised the change, arguing that churches are being left to shoulder additional costs at a time when many are already struggling to raise money for maintenance.
She said: “The Government has chosen our churches to foot the bill for its Budget black hole. This ‘Places of Worship Renewal Fund’ is nothing more than a shameless stealth tax that saddles communities with thousands in added VAT.”
Sabine warned that historic religious buildings should not be viewed solely as places of worship, pointing to their role as community hubs that provide practical support to people of all backgrounds.
She said the loss of VAT relief could mean repairs being delayed, doors closing and local groups losing the spaces on which they depend.
The Liberal Democrats have pledged to campaign against the change and reintroduce VAT relief for listed places of worship.
The accusation is politically damaging because it presents the Government’s decision as a choice between balancing public finances and protecting community institutions. However, the phrase “stealth tax” is the party’s political characterisation of the change, rather than an official description of the new funding arrangements.
The Government has not simply withdrawn all support for historic places of worship. It has replaced the former scheme with a capital grants programme intended to pay for eligible repair and improvement projects.
The central disagreement is whether the new arrangements will provide sufficient and accessible support to compensate for the loss of the previous VAT rebate system.
Why the end of the VAT scheme matters
The Listed Places of Worship Grant Scheme operated for more than two decades, helping religious buildings recover eligible VAT costs associated with repairs and maintenance.
According to the House of Commons Library, the scheme supported around 7,000 claims annually and paid more than £350 million in grants to churches, synagogues, mosques and temples over its lifetime. It was designed to reduce the financial burden of VAT on essential work to historic places of worship. <Cite refs={[“turn232673search4”]}/>
The programme closed in 2026 after its final funding allocation was exhausted and the Government confirmed that there would be no further application rounds.
For churches responsible for old stonework, roofs, drainage systems, heating and electrical installations, VAT can represent a substantial addition to the cost of necessary work.
Under the previous arrangement, eligible VAT could be reclaimed through the grant scheme, subject to its rules and limits. Without that route, churches must consider whether they can absorb the extra cost, secure alternative funding or postpone the work.
That can be particularly difficult for small rural congregations. A historic church may be an important local landmark without having a large congregation, significant reserves or a wealthy donor able to finance urgent repairs.
Maintenance costs can also arrive at the worst possible time. A building may require extensive work after years of gradual deterioration, leaving volunteers to organise fundraising campaigns while trying to keep regular services and community activities running.
Delaying repairs is not always a realistic option. Water entering through a damaged roof can worsen timber decay, damage internal features and create further costs. Structural problems may also require restrictions on access until the building has been made safe.
For critics of the policy, the concern is that the loss of a predictable VAT rebate could make it harder for some churches to plan major projects and raise the money needed to complete them.
The consequences could be felt not only by worshippers, but also by people who use church buildings for social support, advice, meals and activities for families.
Churches warn that community services are at stake
Sir Philip Rutnam, chair of the National Churches Trust, welcomed the Government’s new fund but warned that thousands of rural churches continue to face serious financial pressures.
He said: “There are thousands of rural churches with small congregations struggling to look after extraordinary buildings. And everywhere churches now face paying 20% extra for repairs with the change to VAT.”
Rutnam argued that a more comprehensive approach was needed, combining a better grant scheme with VAT relief for churches, which he compared with support available to museums.
He also highlighted the importance of keeping buildings fit for everyday community use.
“You cannot run a parent and toddler group or a food bank in a church with a leaking roof or a crumbling tower,” he said.
His warning underlines the practical dilemma facing many church committees. Funds raised locally may already be committed to routine bills, insurance, heating, essential maintenance and the costs of keeping buildings open.
A major repair project can require fundraising over several years, while an urgent defect may need attention immediately. If the congregation cannot bridge the financial gap, it may have to delay the project, reduce the use of parts of the building or seek additional assistance.
The wider issue is whether the new funding model can respond quickly enough to the different needs of historic buildings across England, including those serving communities with the fewest financial resources.
Government defends £92million replacement fund
The Government has defended the new Places of Worship Renewal Fund, arguing that it provides targeted support for essential repairs and improvements at buildings facing the greatest financial need.
The programme has a total budget of £92 million over four years, equivalent to £23 million annually, and is administered by Historic England. It is intended to support eligible listed places of worship in England, regardless of faith or denomination. <Cite refs={[“turn232673search1″,”turn232673search5”]}/>
The Department for Digital, Culture, Media and Sport said that 51 places of worship had been awarded a share of more than £18 million in the first announced round of funding.
A departmental spokesperson said: “These are all projects in areas of the greatest need, where fundraising to get repair works started can be almost impossible.”
The spokesperson added that the upfront capital grants would allow essential repairs and urgent improvements to begin, including work to repair church roofs, restore deteriorating stonework and keep buildings open for their communities. <Cite refs={[“turn232673search11”]}/>
The new fund differs fundamentally from the scheme it replaced. Rather than operating primarily as a mechanism for reclaiming VAT after eligible work has been undertaken, it awards grants towards qualifying capital projects.
Depending on the circumstances, a grant can therefore help meet a wider range of project costs, potentially providing more support than a VAT rebate alone. The programme covers projects ranging from smaller repairs to major restoration work, with grants available from £10,000 up to £1 million. <Cite refs={[“turn232673search1″,”turn232673search5”]}/>
However, access to the money is competitive. Churches must meet the eligibility requirements, demonstrate the need for their proposed work and explain how the project will benefit the community. Priority is given to areas experiencing the greatest deprivation and need for investment.
That means the existence of a substantial national fund does not guarantee that every church with an expensive repair bill will receive assistance.
Churches must also consider how much money they can raise themselves. The published guidance says applicants are normally expected to contribute towards project costs, although higher levels of support, potentially covering the full eligible cost, may be considered in cases of clear need. <Cite refs={[“turn232673search1”]}/>
For wealthier congregations, the new arrangements may provide a workable route to funding essential improvements. For smaller churches with limited reserves, however, preparing applications, meeting project requirements and finding any necessary contribution could remain significant obstacles.
Why the £59,000 warning has raised alarm
The Liberal Democrats have highlighted an estimate suggesting that the 51 places of worship receiving assistance could face an average VAT bill of nearly £59,000.
The figure has added force to the political criticism because it illustrates how VAT on large restoration projects can translate into substantial sums. But it should not be interpreted as a bill that every church in the country will receive, nor does it establish that every recipient of the new fund will be left with an identical financial shortfall.
The amount payable depends on the scale and nature of the work, the applicable VAT treatment, the availability of other funding and whether costs can be recovered through another route.
Historic England’s guidance states that VAT on eligible works can be included in a grant application where it is not otherwise reclaimable. The new fund does not specifically operate as a VAT rebate scheme, but eligible non-reclaimable VAT can form part of the costs supported by a grant. <Cite refs={[“turn232673search1″,”turn232673search8”]}/>
That distinction matters. The replacement programme is not simply a blanket withdrawal of all assistance with VAT, but neither does it guarantee that every church will recover all the tax associated with its repairs.
The argument over the £59,000 estimate therefore reflects a broader question: how much of the additional financial burden will churches ultimately have to absorb themselves?
The answer may vary significantly between projects. Some could receive grants that cover a substantial share of their costs, while others may struggle to secure funding or face a gap between the grant awarded and the total amount required.
For churches already operating on tight budgets, even a partial shortfall can force difficult decisions about which repairs to prioritise and which community activities can continue.
Church leaders call for a longer-term solution
The debate has also drawn criticism from within the Church of England. Andrew Rumsey, the Bishop of St Albans, has pledged to press for churches to have better access to funding beyond the Renewal Fund, including VAT relief for repairs.
His intervention reflects concern that a competitive grant programme, however valuable, may not provide the same certainty as a system that allows eligible repair costs to be reclaimed under established rules.
A separate statement from a spokesperson for the Roman Catholic bishops struck a more positive tone. The spokesperson described the closure of the former grants scheme as regrettable but welcomed the reintroduction of a straightforward grant programme focused on repairs at listed places of worship.
The spokesperson said that the nine Catholic churches expected to benefit from the new scheme were in areas of significant deprivation, where obtaining the money needed for repairs could otherwise be particularly difficult.
The contrasting responses demonstrate the complexity of the issue. Churches welcome the prospect of new investment, especially where buildings face urgent deterioration, but many remain concerned about the loss of the previous arrangement and the uncertainty surrounding future projects.
The policy also raises questions about the long-term preservation of Britain’s architectural heritage. Historic churches can contain centuries-old monuments, stained glass, stonework and other features that are difficult or impossible to replace if they deteriorate beyond repair.
Allowing buildings to fall into disrepair can ultimately prove more expensive than maintaining them consistently. Supporters of continued public assistance argue that helping churches act early can preserve historic structures while protecting the services they provide to local residents.
Will Labour reconsider its approach?
The Government now faces pressure to demonstrate that the replacement fund can deliver practical results for the buildings most at risk.
The Liberal Democrats want VAT relief for listed places of worship to be restored, while church representatives have called for a more comprehensive and dependable approach to repair funding.
Ministers, meanwhile, have emphasised the scale of the new investment and the intention to direct money towards areas where fundraising is particularly difficult.
The disagreement is unlikely to disappear simply because the first grants have been announced. The critical test will be whether churches can obtain enough support to complete essential work without exhausting their reserves or abandoning projects that keep their buildings safe.
There is also a geographical limitation to consider: the Places of Worship Renewal Fund applies to England. Scotland, Wales and Northern Ireland have different arrangements for heritage funding, reflecting the devolved nature of the policy. <Cite refs={[“turn232673search9″,”turn232673search3”]}/>
For Labour, the political challenge is to reconcile its decision to replace the old VAT rebate scheme with the practical needs of congregations responsible for some of the country’s most vulnerable historic buildings.
The new £92 million programme offers a significant source of support, but its competitive nature means that funding cannot be assumed for every project. Nor does its existence settle the argument about whether the previous VAT relief should have been retained.
Church leaders and campaigners are likely to continue pressing for a system that combines investment in major restoration projects with reliable assistance for everyday repairs.
Ultimately, the debate is about more than tax. It concerns whether historic places of worship can remain safe, accessible and useful to the communities around them.
If churches cannot afford to repair leaking roofs, damaged stonework or unsafe structures, the consequences may extend from the loss of historic features to the disruption of food banks, children’s activities and other local services.
Labour’s critics say the withdrawal of VAT relief has shifted too much of that burden onto congregations. The Government argues that its replacement fund offers targeted investment and can support wider capital works.
Whether that approach proves sufficient will depend on how much money reaches the buildings that need it, how accessible the application process is and whether churches can meet the costs that remain.
For now, the row over the alleged “stealth tax” has put the future of historic churches firmly back on the political agenda.