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Setting up a charity in 2025 is a great way to help a cause you are passionate about, or to give back to the community. However, it is essential to ensure you meet the latest legal and formal requirements before you can legitimately proceed with your work.
Getting this right is particularly important as charities are held to a high standard. With the updated guidance from regulatory bodies in 2025, avoiding any missteps now will protect you from potential disqualification or compliance issues later on. Keep reading to find out more.
What Is A Charity?
A charity is a not-for-profit organisation (NFP) that relies on donations or grants to operate. Its primary objective is to provide a public benefit, commonly known as a ‘charitable purpose’.
Feeding the underprivileged, providing free school supplies, building shelters, offering pro bono legal help and aiding animal welfare are all examples of charity work. Charities do not distribute profits for economic benefit but reinvest all resources into their charitable mission.
Since charities do not generate profit, you may be wondering how they secure funding – we’ll cover this in more detail later.
How To Start A Charity
For most of the UK, there are 6 key steps to starting a charity. (If you live in Scotland or Northern Ireland, the rules differ slightly, so please check your local regulations.)
The key steps are as follows:
- Decide on a clear charitable purpose for your organisation
- Choose a distinctive name for your charity
- Pick a charity structure (we’ll discuss this in more detail later)
- Appoint at least three trustees
- Establish a governing document
- Register as a charity if you meet the necessary threshold
- Ensure ongoing compliance with annual reporting and transparency regulations
How To Register A Charity In The UK
A charity must be registered under two circumstances:
- If your charity has an annual income exceeding £5,000 (a threshold that remains in force in 2025)
- If your charity is formed as a charitable incorporated organisation (CIO)
If you meet either of these criteria, you will need to register your charity online. The process requires you to provide detailed information and documents, such as:
- The charitable purpose of your organisation
- How it benefits the public
- Proof of income
- Trustee details
- Your governing document
Who Is The Charity Commission?
The Charity Commission is the principal regulatory body for charities in the UK. It advises on running a legitimate charity, processes annual returns, maintains the charity register, and is responsible for closing charities that fail to meet standards. In 2025, the Commission continues to introduce enhanced oversight measures to safeguard public trust.
To access most of these services, you will need to set up an account with the Charity Commission.
Which Structure Do I Choose?
The legal structure of your charity will determine how it functions. The main types of charity structures are:
- Charitable incorporated organisation (CIO)
- Trust
- Charitable company
- Unincorporated association
If you are considering a charitable company structure, you might want to review our guidance on setting up a company limited by guarantee, which is a common model for charities operating as companies.
The limitations and capabilities of your charity will depend on its chosen structure. For example, an unincorporated association may have restrictions on entering into contracts, whereas a CIO offers more flexibility and legal protection.
It will also affect governance aspects such as voting rights and trustee roles. Be sure to research thoroughly and select a structure that aligns with your organisation’s long-term goals, particularly in light of the developments seen in 2025.
Do Charities Pay VAT?
Yes, charities still pay Value-Added Tax (VAT) in most cases. However, they may qualify for a reduced rate or even be completely exempt from VAT on certain goods and services.
The reduced VAT rate is currently 5%, and under specific circumstances-such as for some essential services and goods-the rate can be set at 0%. For the most up-to-date details on VAT relief for charities, please refer to the UK Government’s VAT relief page.
Is A Charity The Same As A Not For Profit?
Technically speaking, no. While every charity qualifies as a not-for-profit (NFP), not every NFP is recognised as a charity.
What Is A Not For Profit Business?
An NFP channels all its revenue or income towards advancing its primary goal or vision. However, to be classified as a charity, the organisation must demonstrably operate for the public benefit.
Thus, while NFPs may relinquish profit for their mission, only those that meet the public benefit criteria are granted charity status. We’ve written more about the difference between a charity and a social enterprise.
Can Family Members Be Trustees Of A Charity?
There are no strict rules that prevent family members from serving as trustees. However, it is advisable to maintain transparency and address any potential conflicts of interest from the outset.
For further advice on managing potential conflicts of interest, consider reviewing best practice guidelines.
What Legal Documents Do I Need?
Every organisation requires legal documents to secure its business dealings and relationships. For a charity, one of the most crucial documents is your governing document, which may take the form of a Charity Charter.
This document outlines how your charity will be run, detailing key information such as:
- The operational framework and charitable purpose
- Responsibilities and roles of key personnel
- Appointment, rules, and remuneration of trustees
- Procedures for dissolving the charity
Your charity’s chosen structure will influence many of these aspects, so it is important to understand the pros and cons before drafting your governing document. For further insights on drafting robust legal documentation, our guide on legal documents for business is a useful resource.
The governing document must be duly signed by the trustees and submitted as part of your registration, so it is vital to ensure it meets the required standards. You can find guidance on how to produce an effective document here.
How Do Charities Get Funding?
As mentioned earlier, charities do not operate to generate profit; instead, they focus on advancing their charitable objectives. So, how are their activities funded?
Charity income is primarily derived from public donations and fundraising events. Many charities also qualify for government grants and support schemes. Keeping an eye on various government organisations that support charities can help you identify potential funding opportunities.
Private institutions and philanthropic foundations also contribute through donations. A review of the charities register can guide you towards these funding sources. Additionally, as digital fundraising tools become increasingly popular in 2025, you might consider leveraging crowdfunding platforms and social enterprise partnerships to diversify your income streams.
Looking ahead, staying compliant with evolving funding regulations is crucial. Regular reviews of your financial management practices and ensuring transparency will help secure ongoing support and maintain public trust. For more insights into regulatory updates, check out our industry regulations guide.
Key Takeaways
Charities are an honourable cause, but it is vital to ensure that every legal and formal requirement is met to protect your organisation’s purpose and public trust.
To summarise what we’ve discussed:
- A charity is an organisation dedicated to providing public benefit.
- The Charity Commission is the main regulatory body ensuring charities maintain high governance standards.
- If you are starting a charity, key considerations include registration, choosing the appropriate charity structure, and drafting a robust governing document.
- VAT reductions and exemptions may apply in certain circumstances.
- Charities secure funding through donations, fundraising, government grants, and increasingly, digital platforms.
- Ongoing compliance with annual reporting and transparency regulations is essential in 2025 and beyond.
If you would like more information on starting a charity or need assistance with any legal aspects, please feel free to contact us on 08081347754 or email [email protected] for a free, no-obligation chat.
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