How to Set Up a Charitable Trust in the UK

Setting up a charitable trust in the UK isn’t just about writing a cheque or naming a cause. It’s about creating a legal structure that lasts-sometimes for generations-so your vision for good can keep working even after you’re gone. If you’ve ever thought, ‘I want to do something lasting for my community,’ a charitable trust might be the right path. But it’s not as simple as filling out a form. There are rules, paperwork, and responsibilities you can’t ignore. Here’s how to do it right.

What Is a Charitable Trust?

A charitable trust is a legal arrangement where money or assets are held by trustees to support a cause that benefits the public. Unlike a regular charity, it doesn’t need to be registered with the Charity Commission if it’s under £5,000 in income. But even small trusts must follow charity law. The key difference? A trust is governed by a trust deed, not a constitution. That document is your blueprint-it says what the trust does, who runs it, and how money is spent.

Most people set up charitable trusts to support causes like education, poverty relief, animal welfare, or health services. You might want to fund a local youth club, help homeless shelters in your town, or pay for art classes in underfunded schools. The trust holds the funds and makes grants or runs programs directly. It’s not a business. It can’t make a profit for owners. Everything must go back to the cause.

Step 1: Define Your Purpose Clearly

The first rule of a charitable trust? Your purpose must be exclusively charitable. The UK law defines what counts. The Charities Act 2011 lists 13 categories, including:

• Relief of poverty
• Advancement of education
• Advancement of religion
• Advancement of health or saving lives
• Advancement of citizenship or community development
• Protection of the environment
• Animal welfare
• Promotion of human rights

It’s not enough to say, ‘I want to help people.’ You need to be specific. For example:

• Wrong: ‘Help people in Edinburgh.’
• Right: ‘Provide free winter coats and hot meals to homeless individuals in the Leith area of Edinburgh between November and March each year.’

Why does this matter? The Charity Commission won’t approve vague goals. Courts have thrown out trusts that didn’t clearly define their purpose. Be precise. Write it like a legal contract-even if it feels overly formal. That’s the point.

Step 2: Write the Trust Deed

This is the most important document you’ll ever write for your trust. The trust deed is like the constitution of your charity. It must include:

• The official name of the trust
• The exact charitable purpose (no room for ambiguity)
• Who the trustees are (at least two, but three is better)
• How trustees are appointed and removed
• How money is spent and recorded
• What happens if the trust closes (asset distribution clause)

You can’t just copy a template from the internet. Many online templates are outdated or don’t meet current UK law. The Charity Commission offers a standard template you can adapt. But even then, get it reviewed. A solicitor who works with charities can spot flaws you won’t notice. For example, if your deed doesn’t say what happens to leftover money if the trust ends, the law assumes it goes to the Crown. You don’t want that.

One real case: A trust in Glasgow was set up to fund music lessons for kids. The deed didn’t say what to do if no kids applied for three years. When the program stalled, the trustees didn’t know if they could switch to funding art classes. The Charity Commission ruled they couldn’t. The money sat unused for two years. Clear rules prevent that.

Step 3: Choose Your Trustees

Trustees aren’t just volunteers. They’re legally responsible. They manage money, make decisions, and answer to the law. You need at least two. Three is ideal. Each trustee must be:

• At least 18 years old
• Not bankrupt
• Not disqualified by a court (e.g., for fraud or serious crime)

Choose people you trust-but not just friends. Pick someone with financial experience, someone who knows charity law, and someone connected to the cause. For example, if you’re setting up a trust for food banks, include a local volunteer who runs a pantry. They’ll know what’s needed.

Don’t put your spouse and your sibling on the board unless you’re okay with family drama. Disagreements happen. Have a clear process for resolving them in the trust deed. Include a tie-breaker clause: if votes are split, the oldest trustee gets the deciding vote. It’s not elegant, but it works.

Step 4: Register with the Charity Commission (If Required)

If your trust will earn more than £5,000 a year, you must register with the Charity Commission for England and Wales. In Scotland, you register with OSCR (Office of the Scottish Charity Regulator). If you’re under £5,000, you’re not required to register-but you still must follow charity law.

Registration takes about 4-8 weeks. You’ll need:

• Your trust deed
• A completed application form (CC41 for England and Wales, OSCR1 for Scotland)
• Proof of identity for each trustee
• A short statement explaining how your trust benefits the public

Don’t skip this step if you’re over the limit. Running an unregistered charity with over £5,000 income is illegal. You could be fined or forced to shut down. Even if you think you’re doing good, the law doesn’t care about intent-it cares about compliance.

Step 5: Open a Bank Account and Keep Records

Once your trust is set up, open a bank account in the trust’s name. Never mix personal and trust money. Use a separate account. Banks will ask for:

• The trust deed
• Identification for all trustees
• Proof of registration (if applicable)

Keep detailed records of every penny. Income, expenses, grants given, meetings held. Use free tools like Charity Commission’s accounting guidance. You’ll need to file annual returns. Even small trusts must report income and spending. If you don’t, your registration can be revoked.

One trust in Aberdeen forgot to file for two years. They lost their registration. When they tried to reapply, they were denied because they hadn’t kept records. They had to start over. Don’t let that happen.

Step 6: Plan for the Long Term

Charitable trusts are meant to last. But many fail because no one planned for the future. What happens when the first trustee dies? Who takes over? What if your cause becomes outdated?

Include a succession plan in your trust deed. Name backup trustees. Allow for new trustees to be added by vote. Set a rule that trustees must step down after five years-so fresh ideas come in.

Also, think about funding. Don’t rely on one big donation. Set up regular giving. Encourage monthly donations. Apply for grants. Build relationships with local businesses. A trust that only has one source of money is a trust waiting to die.

Common Mistakes to Avoid

• Using vague language in the trust deed. ‘Help the needy’ is not enough.
• Putting family members in charge without clear rules. It leads to conflict and legal trouble.
• Not registering when required. Even if you think you’re small, the law doesn’t care.
• Ignoring record-keeping. You’ll need proof of spending if audited.
• Not updating the trust deed. Laws change. Your cause might evolve. Review your deed every 3-5 years.

One trust in Leeds started to fund literacy programs for adults. After five years, the community needed mental health support instead. But the trust deed didn’t allow changing the purpose. The trustees had to close it and give the money to another charity. That’s a waste of potential.

When to Get Professional Help

You don’t need a lawyer to start a small trust. But if you’re setting up a trust with more than £100,000 in assets, or if you plan to buy property, or if you’re unsure about the legal terms-get help. A solicitor who specializes in charity law can save you years of headaches.

There are also free resources:

• Charity Commission website (England and Wales)
• OSCR website (Scotland)
• Charity Finance Group (CFGB) offers free webinars and templates
• Local voluntary sector support organisations (like Voluntary Action Edinburgh)

Don’t try to do everything alone. The system is designed to be fair, but it’s not intuitive. Ask for help early.

Final Thought: Your Legacy Matters

Setting up a charitable trust is one of the most meaningful things you can do. It’s not about tax breaks or recognition. It’s about making sure your values live on. A trust can outlive you. It can help kids you’ll never meet. It can feed families you’ll never know. But only if you do it right.

Take your time. Get the paperwork right. Build a team you trust. Keep the records. And don’t rush. A good trust lasts decades. A rushed one collapses in a year.