Starting a charity is an exciting step. Whether you’ve spotted a gap in your local community, want to support a cause that means something to you, or you’re turning an existing project into something more formal, it can feel like there’s a lot to think about.
This blog covers the basics of getting your charity off the ground. It’s designed for anyone setting up a new organisation, especially if you’re doing it for the first time or with a small team.
Is charity status the right fit?
Before diving into forms and policies, take a moment to ask whether a registered charity is the right option. You might also want to consider:
- A Community Interest Company (CIC)
- A not-for-profit company
- A community group that isn’t registered at all
There’s no one right answer. Charities can access tax relief and grant funding, but the rules are stricter. CICs and other non-profits offer more flexibility but may not have the same public recognition. If you’re unsure, it’s always worth chatting to someone who understands both.
Registering a new charity
If you do go ahead with registering, you’ll need:
- A clear charitable purpose
- A governing document (your charity’s “rulebook”)
- At least three trustees who are not paid
- A plan for how you’ll deliver public benefit
- A name that isn’t already taken
- An estimate that your income will be at least £5,000 per year
Most new charities now register as CIOs (Charitable Incorporated Organisations), which means you don’t need to register with Companies House separately.
Setting up your finances properly
One of the most important things you can do early on is keep your charity’s money separate and properly tracked. That means:
- Opening a charity bank account (not a personal one)
- Setting up a simple bookkeeping system
- Recording income and spending clearly
- Separating restricted and unrestricted funds
Even if your income is small to begin with, keeping clean records will make annual reporting much easier and give funders more confidence.
We often recommend systems like Xero or ExpensePlus to new charities. These can have low costs to get started and come with helpful tools to get you started. Expense Plus for example shares a helpful finance checklist for new charities which it is worth reviewing
What you’ll need to report
Once registered, you’ll need to send an annual return to the Charity Commission every year. What you need to submit depends on your income, but it usually includes:
- A report from your trustees
- A set of accounts
- A return through the online portal
If your charity has turnover above £25,000 a year, you’ll also need an independent examination of your accounts. That’s something we help many of our clients with.
Tax and payroll
It’s a common misconception that charities are exempt from tax. This isn’t the case, and you should be aware of your obligations around this
Corporation Tax – most charities will not actually have to pay any corporation tax, but you are likely ot be required to submit a corporation tax return periodically. If you don’t do this on time, you will be fined, so if you receive a letter, don’t ignore it.
Payroll taxes – if you employ staff, you will need to consider national insurance costs and of course, process payroll deductions for your staff, as well as making sure you are paying minimum wage, making pension contributions and compliance with employment law
VAT – this is a common area of pitfalls for charities. Charities are charged VAT by suppliers in the same way as businesses and individuals (with some limited exceptions), and if you are trading, you may also need to register to charge VAT. We recommend you speak to your accountant about the types of income you have before making a decision about this
Policies and practical things
It’s not all about paperwork. You’ll also need to think about things like:
- Safeguarding (if you work with children or vulnerable people)
- Insurance for events or public activities
- How you’ll keep personal data safe
- A risk register for your board
If you plan to employ staff, you’ll also need to register with HMRC and run payroll.
Don’t go it alone
Starting a charity can feel like a lot of work, but you will be doing it with others. There are also good resources available to help you, and speaking to someone with experience can make a big difference early on. You may be able to get help, recommendations and training from your local voluntary action organisation. The NCVO offers a lot of resources, and of course, engaging an accountant with experience of charities early on can be really helpful.
