how do i set up a charity?
choose your charity’s purpose
if you have decided to set up a charity, you first need to choose the purpose of your charity. your charity’s ‘purpose’ is what it is set up to achieve and the reason it exists.
your purpose must:
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fall within one or more of the ‘descriptions of purposes’. while it can have more than one purpose, it can’t have any purposes that aren’t charitable
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each of its purposes must be of benefit to the public in general or to a sufficient section of the public
it is vital that you run your charity in a way that is consistent with your purpose.
name and set up your charity
you then need to choose your charity's name and write your charity’s governing document. this is a legal document that creates the charity and says how it should be run. you will also have to find trustees (usually at least 3) who will serve on the governing body of the charity and decide how your charity is going to be funded.
register your charity
usually, a charity must register with the charity commission if it:
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is based in england or wales, and
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generates more than £5,000 in income per year
if your charity does not earn more than £5,000 per year, you can still voluntarily apply for registration with the charity commission, which will grant charity status only in exceptional circumstances (eg if you can prove that additional funding is conditional on the charity being registered).
there are some charities that don’t have to register with the charity commission, including those with ‘excepted’ status. excepted charities include:
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churches and chapels of some christian denominations (and associated funds)
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charitable funds of the armed forces
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scout and guide groups
excepted charities do not have to register with the charity commission if their income is below a particular threshold (ie £100,000 per year, as of december 2023).
some other charities can’t register because they are regulated by a different organisation and are considered ‘exempt’. exempt charities include:
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most universities in england
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lots of national museums and galleries
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some school governing bodies or academy trusts
for more information, read the government’s guidance on registering a charity.
other considerations for setting up a charity
a charity must function as an organisation. this means that, when you start a charity, you need to consider day-to-day matters like:
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compliantly employing paid staff and taking on volunteers (eg by making employment contracts and volunteer agreements)
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how and what your charity will be trading in (ie goods, services, or both)
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handling personal data (ie information about individuals from which they may be identified) in accordance with data protection laws
advantages and disadvantages of running an organisation as a charity
there are many advantages to being a charity instead of a different type of organisation that aims to do good. these include:
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a good level of public trust
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a defined purpose, which acts for the public benefit
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it can be easier to receive grants, as some funders only donate to registered charities
there are also many restrictions on what charities can do. for example:
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charities must follow charity law, which has many stringent rules, including requirements to tell the charity commission and the public about a charity’s work
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charities can only have purposes the law recognises as being charitable and cannot have a mix of charitable and non-charitable purposes
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charities must be independent. a charity can work with other organisations, but must make independent decisions about how it carries out its charitable purposes
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charities must be run by trustees, who are normally unpaid volunteers, unless authorised
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charities can’t usually benefit anyone connected with the charity
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charities can’t take part in certain political activities
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registered charities must provide public and up-to-date information about their activities and finances
tax relief for charity donations
to get tax relief, your charity needs to be recognised by hmrc. this will allow you to claim back tax on gift aid donations. gift aid is a tax relief initiative that means that, for every £1 donated to an eligible charity, the charity can claim an extra 25p via gift aid.
other sources of charitable donation are generally free from tax for the donor. for example, money left to charity in a will is free from inheritance tax, while land, property, and shares donated to charity are free from income tax and capital gains tax.
for more information, read tax relief on donating to charity.
what is a charitable incorporated organisation (cio)?
a charitable incorporated organisation (cio) is one of the four main types of charities. the other 3 are:
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charitable companies limited by guarantee
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unincorporated charitable associations, and
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charitable trusts
the main advantage to choosing a corporate body for your charity (eg a cio), instead of an unincorporated association, is that it will be able to do many things in its own name and trustees will not be personally liable for what the charity does. a cio will always need to be registered with the charity commission, whatever its income.
some questions you will need to consider when picking your charity’s legal structure include:
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who will be running the charity?
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will it have a wider membership?
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will it need to enter into contracts or employ staff in its own name?
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will the trustees be personally liable for what the charity does?
for more information, see the government’s guidance on choosing a charity structure.
