The rise in VAT to 20% will cut the amount of social care that charities can deliver, Sue Ryder Care has warned.
The charity, which supports people with end-of-life and long-term care needs, said its VAT bill would reach £1m as a result of today's hike, equivalent to six months funding for a 16-bed hospice.
The Charity Tax Group estimates that the rise in VAT from 17.5% to 20% will see the charitable sector as a whole lose £140m on top of £1bn it already pays in VAT.
Sue Ryder is calling for charities to have the right to claim back some of the VAT they pay,
Limited companies, local authorities and some NHS services can claim back VAT from the government, but this is not the case for charities, even where they provide NHS-commissioned services.
"We have heard a lot about the Big Society and support the idea of charities delivering more high-quality, innovative and cost-effective public services," said Sue Ryder chief executive Paul Woodward. "However, this is only possible if we are afforded the same benefits that the NHS and local authorities are given relating to VAT."
As a first step, Sue Ryder said charities taking on services transferred to them by the NHS should be given the same tax benefits.
Source: Community Care