Setting up a charity is one of the most rewarding ways to support a cause you care about. However, alongside passion and purpose, you must also follow a clear process, both legally and financially.

Whether you’re starting from scratch or formalising an existing initiative, this guide answers the most common questions trustees have about setting up a charity in the UK in 2025.

It covers not only the legal process but also what it means to manage your charity’s finances responsibly from the start.

1. Who can start a charity in the UK?

Anyone over the age of 18 can start a charity in the UK, provided they are legally capable and not disqualified from acting as a trustee. You don’t need to be a UK citizen, but you do need a UK address for official correspondence. Most importantly, your organisation must have a clear charitable purpose that benefits the public.

2. What counts as a charitable purpose?

A charitable purpose falls within the 13 categories listed in the Charities Act 2011, such as the advancement of education, relief of poverty, or the promotion of health, human rights, or environmental protection. Your purpose must be for the public benefit and cannot exist to make private profit or benefit a closed group.

3. Do I need to register my charity with the Charity Commission?

In most cases, yes. If your charity is structured as a Charitable Incorporated Organisation (CIO), you must register from the beginning, regardless of income. For other types of charities, (e.g. trusts or associations) you need to register once your annual income exceeds £5,000.

Registration is not optional once you cross that threshold. Failing to register can lead to compliance issues and limit your ability to apply for grants or claim Gift Aid.

4. What legal structure should I choose for my charity?

The four main structures are:

• Charitable Incorporated Organisation (CIO)
• Charitable Company (Limited by Guarantee)
• Unincorporated Association
• Charitable Trust

For most new charities, a CIO is the most straightforward option. It offers the benefits of limited liability and legal personality without needing to register separately with Companies House.

Charitable companies must comply with both company and charity law, while trusts and unincorporated associations may be suitable for smaller groups with limited activity. Your choice will affect how you manage finances, report annually and recruit trustees.

5. How long does it take to register a charity?

If your application is complete and your charitable purpose is clear, registration usually takes between 4 and 12 weeks. CIOs tend to process more quickly, as they go through a streamlined route.

Delays often happen due to missing documents, vague charitable purposes, or incomplete financial projections. To avoid hold-ups, gather all documents in advance and ensure your governing document meets current Charity Commission model standards.

6. What information do I need to register a charity?

You’ll need to provide the Charity Commission with your charity’s name, governing document (constitution or trust deed), details of trustees, bank account information, and a clear explanation of your charitable purposes. If you’re applying as a CIO, you’ll also submit a proposed income forecast.

7. Can I set up a charity with just one trustee?

In practice, no. While some structures might allow for minimal trustee numbers, the Charity Commission expects a minimum of three unrelated trustees to ensure sound governance. A broader trustee board also offers greater accountability, more diverse skills and protection against conflicts of interest.

It’s worth assembling a team with different strengths — legal, financial, operational — as you prepare to launch.

8. Do charities need a constitution or governing document?

Yes. This is your charity’s rulebook. It outlines your purpose, how decisions are made, how trustees are appointed, and how funds are used. Without one, you can’t register or operate legally.

The Charity Commission offers model governing documents for CIOs, charitable trusts, and associations. Using these templates can speed up your application and reduce the risk of rejection.

9. What kind of bank account does a charity need?

You must open a bank account in the charity’s name, not a personal account. Most banks require proof of charitable status, trustee identity checks and your governing document.

Choose a bank that understands non-profit requirements, offers dual signatory options and integrates easily with your bookkeeping system. Keeping charity and personal finances separate is essential for transparency and compliance.

10. What records must a charity keep from day one?

Every charity must keep accurate financial records from the start. This includes:

• Income and expenditure logs
• Donation records
• Receipts and invoices
• Asset registers
• Restricted and unrestricted fund tracking

Even if your charity is small, maintaining clear records supports financial reporting, audit requirements, and donor trust. A reliable bookkeeping system — even a simple spreadsheet, can prevent problems later on.

11. Do we need to register with HMRC?

Yes, even if your charity is already registered with the Charity Commission, you must also register separately with HMRC if you want to access tax reliefs such as Gift Aid, VAT exemptions, and business rate reductions. The HMRC registration process requires submitting details about your charity’s purpose, governing documents and bank account.

Once registered, HMRC will issue a unique charity reference number. This enables you to reclaim tax on eligible donations and apply for certain funding programmes that require tax registration.

12. What’s the difference between restricted and unrestricted funds?

Restricted funds are donations or grants given for a specific purpose (for example, to fund a youth programme or buy medical equipment). These must only be used for that stated purpose. Unrestricted funds, by contrast, can be used for general running costs or wherever the need is greatest.

13. Do small charities need audited accounts?

Not always. Most small charities only require an independent examination, not a full audit. As of 2025, the audit threshold applies if your income exceeds £1 million, or £250,000 with assets over £3.26 million. Below this level, an independent examination by a qualified person is sufficient.

14. What is an independent examination, and when is it required?

An independent examination is a simpler alternative to an audit. It involves reviewing your accounts to check they are properly maintained and comply with charity law but without the level of scrutiny an audit entails.

All charities with an income over £25,000 must have their accounts independently examined unless an audit is legally required. The examiner must be independent of the charity and have relevant experience or qualifications, especially if your income exceeds £250,000.

15. What financial reports do we need to submit each year?

All registered charities must submit an annual return and financial accounts to the Charity Commission. The specific format depends on your charity’s size and structure:

• Charities with an income under £25,000 usually submit only an annual return.
• Charities with income between £25,000 and £250,000 submit an annual return and accounts, usually on a receipts and payments basis.
• Larger charities or charitable companies must file accrual accounts with a full trustees’ annual report.

16. What accounting method should our charity use: receipts & payments or accruals?

Small charities (under £250,000 income) can use the simpler receipts and payments method, which tracks money as it comes in and out. Larger charities, or those that are charitable companies, must use accrual accounting, which records income and expenses when they are earned or incurred.

Accrual accounts follow the Charity SORP (Statement of Recommended Practice) and provide a clearer picture of financial health but require more bookkeeping effort.

17. Can trustees be paid or reimbursed?

Generally, trustees are unpaid, but they can be reimbursed for reasonable out-of-pocket expenses, such as travel or materials. If you want to pay a trustee for services, (e.g. accounting or consultancy) you need:

• A clear justification
• Proper authorisation in the governing document or by the Charity Commission
• A written agreement and a recorded decision by unconflicted trustees

18. Do charities have to register for VAT?

Not automatically. A charity must register for VAT if its taxable turnover exceeds the VAT threshold (currently £90,000). Many charity income streams, (such as grants and donations) are not subject to VAT but trading income, event income or certain sales may be.

19. What happens if we don’t meet reporting deadlines?

Missing deadlines with the Charity Commission or HMRC can lead to penalties, increased scrutiny, and reputational damage. Your charity may be marked as “overdue” on the public register, which could impact donor and funder trust.

20. How much does it cost to set up and maintain a charity each year?

Costs vary depending on your structure and activities. Budget for:

• Registration (free for the Commission, but CIOs must file)
• Insurance (public liability, trustee indemnity)
• Accounting support or software
• Website and branding
• Annual reporting or independent examination

Some small charities operate on minimal budgets but it’s wise to plan for basic compliance and administrative costs.