The UK is home to approximately 200,000 registered charities, around 169,000 of which are based in England and Wales. If you are hoping to join this philanthropic effort and make a positive difference to the lives of others, this detailed guide will explain how to set up a charity in six steps.
The information included in this blog relates to charities in England and Wales. Different rules and processes apply if you want to set up a charity in Scotland or set up a charity in Northern Ireland.
What is a charity?
A charity is a type of organisation that is set up to provide a benefit to society. This is in contrast to a commercial (for profit) business that aims to make a profit for the financial benefit of its owners.
In England and Wales specifically, the Charities Act 2011 defines a charity as an organisation that:
- is established exclusively for charitable purposes, and
- is subject to the High Court’s charity law jurisdiction
Charities are non-profit, in the sense that all surplus income is used to further their exclusively charitable aims. However, not all non-profit organisations are eligible to register as charities.
So, if you are thinking about setting up or registering a charity, it’s important to understand what makes a charity. It’s also a good idea to check the alternatives to setting up a charity to ensure that it is the best option for what you want to do.
Set up a charity in six steps
If you are certain that your organisation satisfies the Charities Act definition, follow the six steps below to set up a charity in England and Wales.
Step 1: Choose your trustees
Ideally, a charity should have at least three independent trustees. These are the people responsible for leading the charity and deciding how it is managed and run.
The role of a charity trustee is incredibly important and requires a great deal of commitment. Most trustees are also unpaid volunteers, although they can claim reasonable expenses.
As such, you should recruit and appoint trustees who are genuinely interested in the cause and possess the right skills and experience for your charity.
Who can and cannot be a trustee
Other than a few restrictions, almost anyone can set up and run a charity in the UK. They don’t even need to live in the UK – they can be a citizen or resident of any country in the world.
Unless the charity’s governing document imposes a higher minimum age, trustees must be at least:
- 16 years old, if the charity is registered as a limited company or charitable incorporated organisation (CIO)
- 18 years old, if the charity is a trust or unincorporated association
By law, some individuals are disqualified from being a charity trustee or senior manager (e.g. Chief Executive, Chief Finance Officer), including anyone who:
- has unspent convictions for certain offences
- is disqualified from acting as a company director
- has previously been removed as a trustee, officer, agent, or employee of a charity by the Charity Commission or High Court due to mismanagement or misconduct
- has previously been removed from a position of control or management of a Scottish charity due to misconduct or mismanagement
- is an undischarged bankrupt or subject to bankruptcy restrictions or an interim order, including an individual voluntary agreement (IVA) with creditors
- is subject to a debt relief order, debt relief restrictions order, or an interim order under the Insolvency Act 1986
- has been found to be in contempt of court for making (or causing to be made) a false statement
- is on the sex offenders’ register
- is a designated person under particular anti-terrorist legislation
In limited circumstances, the Charity Commission may waive (remove) a disqualification.
Step 2: Define your charitable purposes
- relief of poverty
- health or the saving of lives
- citizenship or community development
- the arts, culture, heritage, or science
- amateur sport
- human rights and religious or racial harmony
- the environment
- people in need because of a specific disadvantage
- animal welfare
- the efficiency of the armed forces, police, fire, and rescue, or ambulance services
- any other charitable purpose not covered by the other descriptions
Your charitable purposes should clearly explain:
- WHAT outcomes your organisation is set up to achieve (e.g. the relief of food poverty)
- HOW it will accomplish these outcomes
- WHO will benefit from these outcomes
- WHERE these benefits will happen
The purposes of a charity are usually set out in the ‘objects’ clause of its governing document. GOV.UK provides detailed guidance on writing your charitable purposes.
Step 3: Choose a name for your charity
Choosing the right charity name is one of the most crucial aspects of your branding strategy. It is the key means by which others will identify your organisation and become aware of your cause.
Given its importance, you should spend a decent amount of time on this part of the process. This will ensure that your chosen name is unique, memorable, and appropriate for your charity.
Charity name rules
Your main (official) charity name must not:
- be the same as or similar to the name of another charity
- include words or expressions that you don’t have permission to use, e.g. a trade mark, famous name or copyrighted work, or ‘Royal’ words like King, Queen, etc.
- use offensive words or acronyms
- be misleading, e.g. suggest that the charity does something that it doesn’t
- breach intellectual property rules
You can search the charities register online to check the names of other registered charities and ensure that your name is unique.
If you’re setting up a charitable company, you must also check that your charity name is available to register as a company name. Read our ‘guidelines on limited company names’ for more information.
Using a working or alternative charity name
In addition to your main charity name, you can use working/operating or alternative names. This includes abbreviations or acronyms (e.g the Royal Society for the Prevention of Cruelty to Animals uses RSPCA), or alternatives (e.g. Comic Relief is the operating name of Charity Projects).
If you wish to use any working or alternative names, you must provide them when you apply to register your charity.
Step 4: Select a legal structure
To set up a charity in the UK, you will need to select a legal structure. This decision will affect the type of governing document your charity adopts and how your organisation operates.
There are four main types of charity structure:
1. Charitable company
A charitable company is a corporate body that is set up as a private company limited by guarantee. It must be incorporated at Companies House and registered with the Charity Commission.
Once incorporated, a charitable company exists as a legal ‘person’ that can enter into contracts and hold property in its own name (rather than in the names of its trustees). It is also responsible for its own debts. This means that trustees have limited liability for the charity’s debts and actions.
This is the ideal structure if you want to set up a larger charity that employs staff, controls substantial funds or assets, or engages in charitable activities that involve financial risk.
2. Charitable incorporated organisation (CIO)
A charitable incorporated organisation is a relatively new type of corporate structure designed exclusively for charities. However, it is not a company and is not subject to company regulation.
CIOs exist as separate legal entities that can employ staff, enter into commercial contracts, and hold assets in their charity’s name. Trustees are also protected from personal liability for the debts and actions of the CIO.
Charitable incorporated organisations must register with the Charity Commission, but they do not have to register with Companies House.
This is a good structure if you want to enjoy some of the benefits of a charitable limited company without the burden of dual registration, regulation, and filing obligations.
3. Charitable trust
A charitable trust is an unincorporated structure that has no separate legal status from its trustees. This means that trustees are personally responsible for all liabilities and actions of the charity.
Usually, a trust is set up by a small group of people to manage money, investments, or property for the benefit of a particular charity or for charitable purposes.
A trust is most appropriate if your charity:
- will not have wider membership – it will be run by trustees only
- is unlikely to rent premises, own property, or employ staff
- will not provide services or carry on any kind of business, e.g. it will make charitable grants but won’t do any other type of work
A trust must have a trust deed to show that it is charitable. However, you do not need to register your trust with the Charity Commission if its annual income is below £5,000.
4. Unincorporated association
An unincorporated association, or unincorporated charitable association, is the simplest and easiest charity structure to set up and run. Essentially, it is a group of volunteer members who agree to carry out a shared purpose, usually of a social nature (e.g. sports club, community group).
Unincorporated associations do not have to incorporate at Companies House, but they must register with the Charity Commission if their annual income is more than £5,000. As such, they set their own rules and enjoy greater freedom of operation than charitable companies and CIOs.
They have no separate legal personality, which means that individual members are personally liable for the association’s debts, contractual obligations, and actions. Moreover, unincorporated associations cannot employ staff or own premises in their own name.
Whilst this structure does have limitations, it costs absolutely nothing to set up. It is a good option if you expect to stay small and there is minimal risk of liability, or you simply want to test out an idea before registering as a charity.
Step 5: Create a governing document
By law, your charity must have a governing document. This is a rulebook that sets out how your charity will operate. It is legally binding and should explain:
- the organisation’s charitable purposes (‘objects’)
- who runs the charity (trustees) and who can be a member
- how the charity is run
- the responsibilities, duties, and powers of trustees
- how to arrange and hold meetings
- how decisions are made
- rules and procedures for appointing and removing trustees
- rules about expenses and payments to trustees
- how to manage the charity’s finances, assets, and investments
- how to resolve internal disputes
- dissolution provisions for closing the charity
The type of governing document you create depends on your charity’s legal structure:
- limited company – articles of association
- charitable incorporated organisation – foundation or association constitution
- unincorporated association – constitution
- charitable trusts – trust deed or will
The Charity Commission provides model governing documents for all types of charity structures. You can use the appropriate one as a template (recommended) or simply as a reference for creating your own.
The charity trustees must meet to approve and sign the governing document. An independent witness will need to be present if you are setting up a charitable trust.
Step 6: Register your charity
In England and Wales, you are legally required to register your charity with the Charity Commission if:
- it has an annual income of at least £5,000, or
- it is set up as a charitable incorporated organisation
Different rules and processes apply if you want to set up a charity in Scotland or Northern Ireland.
Information required to register a charity
To complete the online application form, you will need to provide the following information about your charity:
- name of the organisation, including any working names
- address and contact details
- trustees’ details
- a PDF copy of your governing document
- charitable purposes
- how the organisation carries out its purposes for public benefit
- a copy of the certificate of incorporation and memorandum (if your charity is a company limited by guarantee)
- proof that your charity’s income is above £5,000 per year (unless it’s a CIO)
- bank or building society account details
You will also need to include a trustee declaration form to confirm that all trustees are eligible. This must be signed by every trustee and attached to your online application as a PDF file.
The charity application form is complex and extensive, so make sure you have all of the required information to hand before starting the process.
For more information, take a look at the Charity Commission’s detailed guidance on how to register a charity in England or Wales.
How long does it take to register a charity?
Once you’ve submitted your online application to the Charity Commission, you will get an automated email to confirm receipt.
Your application should be assessed within 10 working days (but it may take longer) to ensure that:
- your organisation needs to register as a charity
- you have answered all applicable questions in full
- all of the information you have provided is factual
- every trustee is eligible to act as a trustee
The Charity Commission Operational Standards state that they aim to decide the majority of registration applications within 30 working days. However, this timescale is not guaranteed. It depends on their workload and the complexity of your application.
If your registration is successful, the Commission will notify you of their decision by email and enter your organisation on the register of charities.
So, there you have it… how to set up a charity in six steps
Setting up a charity is a big decision. It involves a great deal of planning and requires dedication from everyone involved, but striving to improve the lives of others is always a worthwhile endeavour.
We hope this guide has been helpful and has shed some light on what a charity is and how to set up a charity in England and Wales.
If you have any questions or need help registering a company limited by guarantee, please leave a comment below or contact our company formation team.