How to set up a charity: The essential guide

Are you thinking of setting up your own charity? Many people set up a charity because of their own personal experience, as well as their desire to help others and be a force of positive change. That’s not to say, however, that it’s all plain sailing. Running a charitable organisation is a big responsibility, regardless of its size or purpose. This is especially true now as donors expect total transparency when it comes to how money is handled and where their donations go. In this guide, we will look at the current challenging climate that charities are operating in and the steps you need to take to start your own charity.

Impact of the pandemic on charities in the UK

Did you know that there are over 168,000 registered charities in the UK with 5,000 new charities being registered every year? COVID-19 has of course had a significant impact on charitable giving, with initial surges in donations declining as the economic impact increased. 90% of charities in the UK reported a negative impact from the pandemic and continue to struggle with its implications for fundraising, staff morale, and service delivery. But the fact is that charities are more important than ever. Starting a charity is no small feat, but being well-prepared and well-informed is the first step toward making your ambition a reality. 

How much does it cost to start a charity?

There is no fee for starting a charity – but if you are starting an incorporated charity, Companies House charges a small fee of around £13. However, that doesn’t mean there aren’t costs involved. After all, you need to be funded to pay for expenses (unless you have another source of income) such as staff, premises and equipment. Typically, charities in the UK can spend between 60-70% of their annual income on supporting their cause, with the rest going to governance, administration, and running costs. More specifically, smaller charities (with lower overheads) can spend a higher percentage, while large charities (those with an annual income of £100 million or more) spend a lower percentage.

How to start a charity

 Step 1 – Find trustees 

Charities are governed by a board of trustees who ensure things are being run properly and in adherence to regulations. They should have relevant industry experience and ideally the ability to recruit staff and manage communication and public relations. Typically, you will need 3 or more trustees. These should be people who are:

• Rigorously interviewed for the position
• Have appropriate skills and experience
• Are subject to reference, formal vetting, and background checks
• Unencumbered by conflicts of interest
• Are not disqualified from acting as trustees
• Are checked by the Disclosure and Barring Service if required by your charity
• Are voted for and approved by the rest of the trustee board

It’s a good idea to advertise your open positions through local press, social media, or websites that let you post trustee roles, including the Small Charities Coalition and Trustees Unlimited. Remember, these are the people who will be making key decisions on who you hire, as well as how you raise and invest funds. Take your time to find people who not only have the right experience but also connect with your vision and share your values.

Step 2 – Choose your charitable purposes 

You will need to identify your charitable purposes as these determine the focus of your charity. This is instrumental if you’re going to make a marked difference for your chosen cause. You will need this to aid in recruitment, register with the Charity Commission, and build your brand as an organisation. There is a wide range of charitable purposes to choose from, including:

• Human rights
• Poverty alleviation
• Education
• Animal rights
• Community enrichment
• The arts
• Sports
• Social justice
• Environmental welfare
• Religion

This is a wonderful opportunity to create a unique and inspiring message, so really take the time to think about what motivates you. Dig deep into your passions and personal experiences, as authenticity is crucial to a successful charity brand. This is how you will encourage people to join your cause and support your ongoing efforts.

Step 3 – Name your charity 

The name of your charity is central to your brand, how people recognise your organisation, and what you stand for. It will define who you are and what you do, so you must take the time to work out a compelling and memorable name. 

Here are some guidelines:

• Search the charity register to check the names of charities already out there to ensure what you have in mind hasn’t already been taken. Be sure to check on Google to check unregistered charities too. 
• Connect with your personal experiences to bring some inspiration to your brand! You want your name to be engaging, to draw people into the story behind your charity and what you stand for. Create a name that is moving, informative, and eye-catching.
  
  
• If you want to use the words ‘charity’, ‘charities’ or ‘charitable’ in your name then remember that you must get approval from the Charity Commission first. 
• Include a translation of any non-English words in your charity’s name when you register to make sure it translates well. 

Step 4 – Choose a structure for your charity 

Just like a business, a charity needs a particular structure so that all the various moving parts come together and help you thrive in your overall mission. Here are the four most common charity structures:

• Charitable company: This is a ‘private company limited by guarantee’ rather than shares. In this corporate structure, trustees have limited or no liability for the organisation’s debts. It is regulated by the Charity Commission and Companies House and is commonly used for social enterprises. 
• Charitable incorporated organisation (CIO): This structure is an incorporated body with its own legal capacity. It is designed for charities in which trustees have limited or no liability for debts and is only regulated by the Charity Commission. This makes it cheaper and simpler to run, particularly for charities with either a wider or more focused membership. 
• Charitable trust: Here, your organisation allows trustees to manage assets like money, investments, land or buildings. It doesn’t need a corporate structure or wider membership and is usually best for very small charities that are mostly involved in grant-giving. 
• Unincorporated charitable association: This type of organisation structure allows a group of volunteers to run a charity for a common aim, such as community fundraising, which cannot employ staff or own any premises. This model does carry a little risk, as the liability that trustees take on for the charity could in some cases extend to the charity’s members.

If your organisation has a mix of charitable and non-charitable purposes then you can register as a CIC (community interest company) or as a social enterprise. 

Step 5 – Design your code of conduct

A code of conduct (also called a statement of values or a code of ethics) is a policy that outlines the rules and regulations that your board members must follow. This is usually accompanied by a second code of conduct for employees and volunteers. 

The code of conduct essentially states your organisation’s commitment to a set of core values. By signing it, your board members are bound to these principles through a legally enforceable contract. This is important for building trust with the public, creating accountability for your actions and supporting your commitment to strong governance and compliance.

It’s also valuable for guiding decision-making and other activities including fundraising, selecting beneficiaries, hiring decisions, and handling violations. A good code of conduct includes the following core elements:

• Asset protection
• Attendance expectations
• Management of conflicts of interest, outside activities, employment, and directorships
• Privacy and confidentiality policy
• Disciplinary actions for violations
• Standards for diversity, inclusion, and equity
• Management of volunteers
• Charity culture
• Expectations of employee conduct
• Procedures for managing funds and assets
• Policies for record-keeping

While it’s not a legal requirement to have a code of conduct, it’s easy to see why this document is so important. With a clear roadmap of how to behave as part of your organisation, issues can be managed to prevent conflict as well as resolve it objectively as and when it occurs. 

Step 6 – Draw up your governing document

The governing document is essentially the rulebook for how your charity will operate and be managed. It is a legally binding document that is required by law when starting your charity and works alongside your code of conduct. It will need to contain the following elements:

• The name of your charity
• Your charitable purpose
• The powers your trustees will have to carry out the purpose of the charity
• The number of trustees, eligibility criteria, term limits, and guidelines on appointment
• How many meetings you will hold per year, how meetings will be run, and how the voting system will work
• Criteria for membership and terminating membership
• Guidelines on how the charity will meet legal accounting requirements, who will hold control over the bank accounts, how a treasurer will be appointed, and other internal financial controls
• Expense and benefit controls for trustees
• Information on how to close the charity and distribute the assets

Because this is so important, it’s highly recommended that you have a law specialist help draw it up and go through it so that each trustee understands how it will be applied. Please note that for a governing document to be legally binding, it must be signed by all trustees. 

Step 7 – Set up your bank account

A bank account is necessary for managing your charity’s expenses and income. These work just like your personal or business bank account, but should be set up in your charity’s name. Typically, while most banks and building societies offer charity bank accounts, these often have eligibility criteria related to the charity’s structure, status as a registered charity or its projected annual income. Be sure to speak to several organisations to help you understand monthly account charges and overdraft fees, as well as any additional or value-added features. 

Step 8 – Register

Now it’s time to register your charity. Keep in mind that you must register your charity if your income is £5,000 per year, if your structure is a CIO, or if you are based in England or Wales.

If you are operating in Scotland, you will need to apply for status with the Scottish Charitable Incorporated Organisation (SCIO). If it is based in Northern Ireland, you will need to register with the Charity Commission for Northern Ireland in compliance with the Charities Act (Northern Ireland) 2008.

Typically, you will need the following (please check the relevant government websites first, as this may change between England & Wales, Scotland, and Northern Ireland):

• Your charitable purposes
• Details on how you will run your charity
• Financial documents, including proof of your charity’s income and accounts
• A recent bank statement
• The latest published annual accounts (approved by an independent examiner or auditor)
• A formal offer of funding (from a recognised funding body)
• Bank or building society details
• Proof of an income over £5,000 (unless you are a CIO)
• Relevant personal information and contact details for board members and trustees
• Your governing document in a PDF format 

If all the documentation and necessary information is correctly supplied, it will take around 45 days to register your charity.

Step 9 – Develop a compliant, good faith fundraising strategy

Of course, the purpose of your charity is to raise funds to support your cause, so this is one of the most exciting moments you’ve been waiting for! But as we’ve mentioned, this is also one of the areas where you have to pay close attention to not only create a killer fundraising strategy but also to stay within regulatory requirements for raising funds as a charity.

Charity fundraising is regulated in England, Northern Ireland, and Wales by the Fundraising Regulator, an independent organisation focused on ensuring that fundraising is done ethically and sustainably, in line with a code of conduct. In Scotland, the same role is fulfilled by the Scottish Fundraising Standards Panel.

Depending on your strategy, you may also have to check that your marketing and fundraising activities are compliant with the Advertising Standards Authority (ASA), Information Commissioner’s Office (ICO), Charity Commission for England and Wales, and Ofcom.

Step 10 – Make it easy and accessible to donate 

Most charities embrace multiple donation channels to maximise public accessibility, but one stand-out way to do this is through digital fundraising. This is possibly the most secure, simple, and accessible channel for funds, but it hasn’t been fully adopted by most charities, many of which are running 5-10 years behind the commercial sector in embracing digital transformation. This makes it a great way to engage the latest generation of tech-savvy donors.

You can start your fundraising efforts and see results in record time by simply integrating contactless collection devices into your on-the-ground fundraising. Today, just ​​17% of payments in the UK are cash (dropping by 35%), while contactless payments are on the rise, accounting for over one-quarter of all UK payments. Integrating contactless donation boxes and units into your fundraising allows you to keep up to date with changing consumer habits, with the added security and ease of not having to deal with cash on hand.

GoodBox is a FinTech company that specialises in creating bespoke solutions for charities and nonprofits of all sizes. As a new charity, we can help you hit the ground running by optimising how you fundraise. From our cashless and mobile donation devices to our donation behaviour analysis software, there are endless ways we can work with you to better connect you with your donors. To find out more about how we can help, get in touch with our experienced team today or download a pricing brochure.