Charity and Not-for-Profit Law in England and Wales

At a glance

• Legal meaning of "charity": an institution established for charitable purposes only, for the public benefit — Charities Act 2011, ss.1-4.
• 13 recognised categories of charitable purpose, from the prevention or relief of poverty to environmental protection, set out in section 3 of the Charities Act 2011, plus a catch-all for closely analogous purposes.
• Registration threshold: most charities must register with the Charity Commission once income reaches £5,000 a year; charitable incorporated organisations (CIOs) must register whatever their income.
• Four main structures: charitable incorporated organisation (CIO), charitable company limited by guarantee, unincorporated association, and charitable trust — each with different liability and registration consequences.
• Six trustee duties, set out in the Charity Commission's Essential Trustee guidance (CC3), with personal liability possible for serious breaches.
• The Charities Act 2022 reformed governing-document changes, permanent endowment, land disposals, trustee payment for goods, mergers and ex gratia payments, phased in between October 2022 and November 2025.
• Community interest companies (CICs) are a separate not-for-profit vehicle regulated by the Office of the Regulator of Community Interest Companies, not the Charity Commission.

What the law means by "charity"

Not every good cause is a charity in the legal sense. Under section 1 of the Charities Act 2011, a charity is an institution established for charitable purposes only, which is subject to the control of the High Court in its charity jurisdiction. Two further tests then have to be satisfied.

First, the purpose has to fall within one of the descriptions set out in section 3(1) of the Act. Second, under section 4, it has to be for the public benefit — there is no automatic presumption that any type of purpose is beneficial; it has to be shown, in accordance with the existing law on public benefit.

The 13 descriptions of charitable purpose

Section 3(1) of the Charities Act 2011 lists twelve specific categories, plus a thirteenth catch-all. A purpose must fall within one (or more) of these to be capable of being charitable:

1. The prevention or relief of poverty
2. The advancement of education
3. The advancement of religion
4. The advancement of health or the saving of lives
5. The advancement of citizenship or community development
6. The advancement of the arts, culture, heritage or science
7. The advancement of amateur sport
8. The advancement of human rights, conflict resolution or reconciliation, or the promotion of religious or racial harmony or equality and diversity
9. The advancement of environmental protection or improvement
10. The relief of those in need because of youth, age, ill-health, disability, financial hardship or other disadvantage
11. The advancement of animal welfare
12. The promotion of the efficiency of the armed forces of the Crown, or of the police, fire and rescue services or ambulance services
13. Any other purposes not falling within the above, but recognised as charitable under existing charity law, or reasonably regarded as analogous to, or within the spirit of, one of the categories above

The public benefit requirement

Even if a purpose falls within one of these categories, it isn't automatically charitable — it must also be for the public benefit. This has two strands developed through case law: the purpose itself must be beneficial, and that benefit must be available to the public, or a sufficient section of it, rather than being restricted to a private group of individuals. This applies to every one of a charity's purposes, not just some of them.

The Charity Commission's role

The Charity Commission for England and Wales is the independent regulator for charities in England and Wales (Scotland and Northern Ireland have their own separate regulators). It maintains the register of charities, publishes detailed guidance for trustees, and has statutory powers to investigate and intervene where things go wrong.

Do you need to register?

You must apply to register your charity with the Charity Commission if either of the following applies:

• its income will be at least £5,000 a year, or
• it's a charitable incorporated organisation (CIO) — CIOs must register whatever their income

Charities with income below £5,000 that aren't CIOs are not required to register, though they can do so voluntarily, and some structures (exempt and excepted charities) have different arrangements. Registering with the Charity Commission is a separate step from registering with HMRC, which you need to do to claim tax reliefs including Gift Aid. HMRC generally requires that a body eligible for a charity regulator registers with that regulator first, before applying to HMRC for recognition as a charity for tax purposes.

Choosing a legal structure

Your charity's structure is set by its governing document and affects who runs it, whether it can hold contracts or employ staff in its own name, and whether trustees are personally liable for what the charity does. There are four main options.

| Structure | Corporate body? | Wider voting membership? | How you register | Trustee liability | |---|---|---|---|---| | Charitable incorporated organisation (CIO) | Yes | Optional — choose an "association" CIO for wider membership, or a "foundation" CIO if only trustees are members | Charity Commission only (no separate Companies House registration) | Limited | | Charitable company (limited by guarantee) | Yes | Optional | Companies House, and the Charity Commission if eligible | Limited | | Unincorporated association | No | Yes | Charity Commission if eligible; no Companies House registration | Trustees personally liable | | Charitable trust | No | No — run solely by trustees | Charity Commission if eligible | Trustees personally liable |

A CIO is often chosen by new, smaller charities because it gives trustees limited liability without the dual reporting burden of registering with both the Charity Commission and Companies House. A charitable company suits organisations that want the flexibility and familiarity of company law, or that expect to grow significantly. Unincorporated associations and trusts are simpler to set up and run, but because they have no separate legal personality, trustees can be personally exposed on contracts, leases and other liabilities, and land generally has to be held by named individuals or a custodian on the charity's behalf.

Trustee duties and personal liability

Trustees have independent control over, and legal responsibility for, a charity's management and administration. The Charity Commission's Essential Trustee guidance (CC3) sets out six main duties:

1. Ensure your charity is carrying out its purposes for the public benefit.
2. Comply with your charity's governing document and the law.
3. Act in your charity's best interests.
4. Manage your charity's resources responsibly.
5. Act with reasonable care and skill.
6. Ensure your charity is accountable.

Trustees aren't expected to be perfect, and the law generally protects those who have acted honestly and reasonably. But where a trustee causes loss through a genuine breach of duty, they can be held personally liable, and in the most serious cases the Commission can disqualify a trustee from acting again.

Can trustees be paid?

Being a trustee is meant to be a voluntary role, and this is treated as fundamental to how charities operate. Charities can reimburse a trustee's genuine, reasonably incurred expenses without needing Commission approval — that is not treated as a trustee payment. Paying a trustee (or someone connected to them) for goods or services is different and higher-risk: since the Charities Act 2022 came into force on 31 October 2022, charities have a statutory power to pay a trustee for supplying goods alone, not just services, in defined circumstances. Any such payment needs a written agreement, must be reasonable and clearly in the charity's interests, and the trustee being paid must not take part in the board's decision to approve it.

Beyond charity: community interest companies (CICs)

Not every not-for-profit organisation needs to be a charity. A community interest company (CIC) is a type of limited company designed for people who want to run a business or activity for the benefit of the community, rather than purely for private profit. CICs are regulated separately from charities, by the Office of the Regulator of Community Interest Companies, working with the Department for Business and Trade. To become a CIC, an organisation registers as a limited company through Companies House and must satisfy the CIC Regulator's "community interest test" — that a reasonable person would consider its activities are, or will be, carried on for community benefit.

A CIC does not get the tax reliefs available to a registered charity, and it is subject to an asset lock restricting what can be distributed to shareholders, but it can (within the Regulator's limits) pay dividends and interest to investors, giving it more flexibility to raise investment than a charity. Some social enterprises choose a CIC structure because it is quicker and more flexible to set up, and later consider converting to a charitable structure if their purposes and funding model make that the better fit.

Reporting, accounts and annual returns

Once registered, ongoing reporting depends on income:

• Income under £10,000: report your income and spending figures only.
• Income between £10,000 and £25,000: complete a full annual return, but you don't need to submit accounts with it.
• Income over £25,000: file a full annual return, a trustees' annual report, your accounts, and either an independent examiner's report or an audit report.
• Audit required: if income exceeds £1 million, or if income is over £250,000 and gross assets exceed £3.26 million, trustees must arrange a full audit rather than an independent examination.

Charitable incorporated organisations have to submit an annual return, trustees' annual report and accounts to the Charity Commission every year, regardless of income — unlike other structures, there is no lower-income exemption for CIOs. The annual return is normally due within 10 months of the end of the charity's financial year.

These financial thresholds are periodically reviewed and are due to change from 1 October 2026 under a government consultation on charity financial thresholds, so always check GOV.UK for the figures that apply at the time you're filing, rather than relying on any figure quoted here.

Fundraising rules

Charities that fundraise from the public are expected to follow the fundraising regulator's Code of Fundraising Practice, covering matters like transparency about how donations are used, protecting vulnerable donors, data protection, and the standards expected of paid fundraisers. The Charity Commission's own trustee guidance on fundraising explains the legal duties trustees carry when their charity raises money from the public, including proper oversight of any fundraising carried out on the charity's behalf by third parties. Since the Charities Act 2022, there are simplified statutory rules covering what trustees must do if an appeal raises too little to achieve its purpose, raises more than needed, or circumstances change so the funds can no longer be used as originally intended. Public collections in a public place may also require a local authority permit, separate from any fundraising regulator registration.

The Charities Act 2022: what changed

The Charities Act 2022 amends the Charities Act 2011 and was brought into force in four phases:

• 31 October 2022: a statutory power to pay a trustee for providing goods alone (not just goods with services) to the charity in defined circumstances; simpler rules for fundraising appeals that raise too little, too much, or can no longer be used as intended; and a power for charities established by Royal Charter to amend their Charter with Privy Council approval.
• 14 June 2023: more flexibility when disposing of charity land, including who can give the required advice; new statutory powers to spend from smaller permanent endowment funds (£25,000 or less) or borrow against permanent endowment without Commission authority in some cases; and new Commission powers over unsuitable charity names.
• 7 March 2024: a new statutory power for trusts and unincorporated associations to amend their governing documents (with Commission authority still needed for certain "regulated alterations", such as changes to charitable purposes or trustee benefits); and new rules meaning that, for qualifying mergers, gifts left to a charity that has since merged will generally take effect as gifts to the charity it merged with.
• 27 November 2025: changes to how charities make ex gratia (moral) payments, including a power for trustees to delegate this decision-making to staff or a sub-committee, and allowing certain moral payments to be made without needing Commission authority first.

When things go wrong: Charity Commission powers

Where the Commission has concerns about how a charity is being run, it can open a formal inquiry, issue an official warning, freeze a charity's bank accounts, or appoint an interim manager to protect the charity's assets and beneficiaries while concerns are resolved. In the most serious cases, it can disqualify an individual from acting as a trustee.

Separately from the Commission's own regulatory powers, a charity's governing document usually sets out how a trustee can be removed by the board itself — for example following a serious breach of duty or conduct damaging to the charity's reputation. If your charity is a company, company law gives members the right to remove a director, including a trustee-director, provided the correct statutory procedure is followed. Checking your own governing document first is usually the quickest route; Commission intervention is generally reserved for cases the charity itself cannot resolve.

Practical next steps

1. Confirm your organisation's purposes genuinely fall within the legal test. Check your purposes against the section 3(1) categories and think through how you would evidence public benefit before you commit to a structure.
2. Choose your structure deliberately, not by default. Weigh up corporate status, liability, and whether you want a wider voting membership, using the comparison above as a starting point.
3. Register with the right bodies in the right order. Check your Charity Commission position first (registration is compulsory above £5,000 income, or for any CIO), then register separately with HMRC if you want to claim Gift Aid and other reliefs.
4. Put trustee duties into practice, not just on paper. Make sure every trustee has read the Essential Trustee guidance, understands the six duties, and knows how conflicts of interest are handled at board level.
5. Build your reporting calendar around your income band. Know which of the four reporting tiers your charity sits in, and diarise the 10-month annual return deadline from your financial year end.
6. Review governance annually, not just when something goes wrong. Revisit your governing document, safeguarding, financial controls and fundraising compliance at least once a year, particularly as the Charities Act 2022 reforms continue to bed in.

This guide provides general information about charity and not-for-profit law in England and Wales. It's a starting point for understanding the legal framework, not a substitute for advice tailored to your organisation's specific purposes, structure and circumstances. The law described was accurate as at July 2026 and charity law changes regularly, particularly reporting thresholds and the phased Charities Act 2022 reforms, so always check GOV.UK and legislation.gov.uk for the current position, or speak to an adviser about your situation.

Last reviewed: July 2026 by a non-practising solicitor · Next review due: July 2027 or on legislative change.