If you are looking to set up a charity in England or Wales, here is the important information you need to know. If you have further questions, then call the Charity Commission on 0844 248 2658.
How do I set up a charity?
There are 6 steps you need to follow if you intend to set up a charity which is legal and functional.
Find at least three trustees for the charity. These are the people who lead and run the charity, making all the important decisions. Trustees might call themselves directors, board members, governors, or committee members instead. Not everyone working for a charity will be a trustee with the responsibilities of controlling the charity operations.
You must decide on the purpose of your charity and how it benefits the public. This could be protecting the environment, animal welfare, or human rights, contributing to public health and education services, relieving poverty, promoting religious or racial harmony, or developing the community through the arts or sport. You can’t help one specific person.
Choosing the name of your charity is very important. It must be original, not similar to an existing charity name or including trademarks. Search the Charities Register to check if the name is taken already. The charity name can’t contain acronyms or any offensive words, or be misleading. You can use an additional name, such as an abbreviation or working name.
You must choose the legal structure for your charity. The structure affects who runs the charity and how they do this. It also affects what the charity can do. The four common structures you can choose to set up include a charitable company, a charitable incorporated organization (CIO), a charitable trust, or an unincorporated charitable association.
You will need to create a governing document or rulebook which explains how your charity is run. This document explains the aims of the charity, who runs it, and how they run it. The governing document contains rules about appointing trustees and payments and expenses for trustees. It will also explain how to close the charity if this becomes necessary.
Apply to register your charity if it is a CIO or if your annual income is £5,000 or more. This applies to charities in England and Wales. You must provide supporting documents and information. This includes bank details, financial accounts, contact details, a copy of the governing document, and proof of income such as bank statements or formal funding offers.
How much does it cost to set up a charity?
The start-up costs for your charity will vary depending on its size and aims. There will be costs for recruiting trustees and volunteers, and renting premises and providing materials if applicable. If you are registering as a charitable company, it will cost £40 to apply. There are no registration fees listed for other charity structures. You can fundraise without registering to help you start up.
Whenever you fundraise, you must do it according to legal regulations. Make it clear to the public if you are not registered with the Charity Commission and why. You can still register with HMRC for charitable tax relief, as this will help to gain trust in your charity. Aside from donations, you can receive funding from central or local governing bodies, or grants from private organizations.
How do I set up a charity fund account?
In order to start fundraising, you will need to open a bank account for your charity funds. Some banks require a registration number from HMRC to open a charity account. However, plenty of banks offer accounts for small charities not registered with HMRC or the Charity Commission.
Many banks offer specialist accounts like “not for profit” or “community” accounts. Do research to find the right one for your charity. If you can’t register a bank account in your charity’s name, the Treasurer can use a dedicated personal account. They must clarify this for the charity’s records.
How do I set up Gift Aid for my charity?
You can raise more money for your charity through Gift Aid. To do this you have to register with HMRC for charitable recognition. This will also give you other tax breaks. As a charity, you will only have to pay taxes on any income which you do not use for charitable expenses. You will need to complete an annual tax return for any such income. If your charity’s overall income is more than £10,000 in a year, you must submit an annual return to the Charity Commission. Charitable tax relief is only available for charities with a base in the UK, EU, Iceland, Norway, or Liechtenstein.
Gift Aid enables you to claim back 25p for every £1 you receive in donations. However, the donor must have paid as much in tax as you are claiming in that year. They also have to sign a Gift Aid declaration form allowing you to claim it. Without a declaration, you can only claim Gift Aid on cash or contactless card donations of £20 or lower under the Small Donations Scheme. There are rules for which kinds of donations you can claim Gift Aid on. For example, you cannot claim Gift Aid on Payroll Giving scheme donations. You have to keep records of Gift Aid declarations.