There are 6 steps to setting up a charity.

1. Find trustees for your charity

You usually need at least 3. Trustees are responsible for the operation of your charity. They must show they understand their legal requirements.

2. Make sure the charity has ‘charitable purposes for the public benefit’

Your charity must have ‘charitable purposes’ that help the public (known as being ‘for public benefit’).

Charitable purposes include: relieving poverty; education; religion; health; saving lives; citizenship or community development; the arts; amateur sport; human rights; religious or racial harmony; the protection of the environment; animal welfare; the efficiency of the armed forces, police, fire, or ambulance services

You must run your charity in a way that’s consistent with and supports its purposes – and only those purposes. Your charity can have more than one purpose, but it can’t have any purposes that aren’t charitable.

3. Choose a name for your charity

The official name of your charity is known as its ‘main name’. Your charity may also have a ‘working name’ which is another name it uses. Your charity’s main name or working name must not be the same as or too similar to the main or working name of an existing charity and must not be misleading.

4. Choose a structure for your charity.

There are 4 common charity structures and we can help you to choose an appropriate structure for your charity:

Charitable company: Your charitable companies will have to be limited by guarantees rather than shares when you register. Trustees have limited or no liability for a charitable company’s debts or liabilities.

Charitable incorporated organisation (CIO): A CIO is an incorporated structure designed for charities. You create a CIO by registering with the Charity Commission. You do not need to register with Companies House. Trustees have limited or no liability for CIO debts or liabilities.

Charitable trust: A ‘charitable trust’ is a way for a group of people (‘trustees’) to manage assets such as money, investments, land, or buildings.

Unincorporated charitable association: An ‘unincorporated charitable association’ is a simple way for a group of volunteers to run a charity for a common purpose. Unincorporated charitable associations cannot employ staff or own premises.

Your charity must have a governing document which is setting out:

  • its charitable purposes (‘objects’)
  • what it can do to carry out its purposes (‘powers’), such as borrowing money
  • who runs it (‘trustees’) and who can be a member
  • how meetings will be held and trustees appointed
  • any rules about paying trustees, investments and holding land
  • whether the trustees can change the governing document, including its charitable objects (‘amendment provisions’)
  • how to close the charity (‘dissolution provisions’)

As a trustee, you must have a copy of your charity’s governing document. Refer to it regularly because it tells you how to run your charity. For example: how many trustees are needed to make decisions, how to recruit them and how to run trustee meetings; how to look after your charity’s money, land, property, or investments and keep accounts and how to resolve internal disputes.

Register as a charity if your annual income is over £5,000 or if you set up a charitable incorporated organisation (CIO).


As a charity you can get certain tax reliefs. To benefit you must be recognised by HM Revenue and Customs (HMRC). Charities do not pay tax on most types of income as long as they use the money for charitable purposes. You can claim back tax that’s been deducted, for example on bank interest and donations (this is known as Gift Aid).

Your charity may need to pay tax if you’ve:

  • received income that does not qualify for tax relief;
  • spent any of your income on non-charitable purposes; or
  • You need to complete a tax return if your charity has tax to pay.


You can leave anything you own to charity. There are no restrictions as to what can and can’t be left to charity in your will.

You can donate:

  • a fixed amount
  • an item
  • what’s left after other gifts have been given out ‘residuary estate’
  • Your donation will either be taken off the value of your estate before Inheritance Tax is calculated or reduce your Inheritance Tax rate if 10% or more of your estate is left to charity.

Gifts to qualifying charities are themselves exempt from IHT regardless of the value of the gift. However, if a gift to charity in a Will meets certain conditions, the lower rate of 36% IHT can apply to the taxable part of an individual’s estate.

The reduced rate of 36% applies where the individual leaves at least 10% of their net estate, known as ‘the baseline amount’, to charity. In simple terms, the baseline amount is the entire estate in an individual’s sole name (not including assets held in trust, or joint assets that pass by survivorship) less debts, funeral expenses and certain IHT exemptions – such as the nil rate band, currently £325,000. 


A gift can be made to any approved charity, and you’ll need to contact the charity to ensure it can accept the proposed gift. Once the charity has confirmed it can accept the gift the property can be transferred to it. To claim the tax relief, you obtain a certificate from the charity containing a description of the land or buildings.

You must give the whole of your beneficial interest in a property, which means that you cannot live in it. An individual donor deducts the relief when they calculate their income for the tax year in which they make the gift.

For an outright gift, the amount you can deduct is the value of the net benefit to the charity at the time you give or sell them the qualifying investment, plus any incidental costs (for example brokers fees or legal fees), less any money or the value of other benefits you or a person connected with you (such as a relative or connected company) receive in consequence of you giving or selling the qualifying investment to charity.

Outright gifts and bequests to charity are completely free of Inheritance Tax. You’re not liable to Capital Gains Tax or Corporation Tax on capital gains when you make a gift of assets, such as land or stocks and shares, to charity. Charities do not need to pay Stamp Duty on acquisitions of land or buildings. 

What the recipient charity does with the gift is entirely for the charity to decide. The investments can be sold immediately, or at a later date, and the proceeds used for charitable purposes, or they can be retained by the charity as an investment.

Discretionary Trust

Alternatively, you can leave a cash legacy or share of your estate to a discretionary trust which includes charities as potential beneficiaries. The executors/trustees of your Will would then have the discretion as to how much of the gifted sum should pass to charity. 

They can also decide which charities to benefit. Whilst the executors/trustees will have discretion, you can leave a letter of wishes providing guidance as to which charity or charities you wish to benefit and by how much.

If you need further legal advice on setting up a charity, please contact us at 020 8240 9018 or fill in the enquiry form on our website.