Non-profit organisation: How to set up and run yours in the UK

Published Friday 23 January 2026

Table of contents

• What is a non-profit organisation?
• Legal structures for non-profit organisations
• What's the difference between a charity and a non-profit?
• Types of non-profit organisations
• Can you make money from a non-profit?
• How does a non-profit generate revenue?
• How do I start a non-profit organisation?
• FAQs on starting a non-profit organisation

Key takeaways

• Choose your legal structure carefully as it affects your operations, funding eligibility, and tax obligations. Consider a charitable incorporated organisation (CIO) for simpler reporting, a community interest company (CIC) for business-like operations, or an unincorporated association for small groups with minimal financial risk.
• Develop multiple revenue streams including donations, grants, fundraising events, programme service fees, and corporate partnerships to ensure financial sustainability while reinvesting all profits back into your mission rather than distributing them to owners.
• Create a comprehensive business plan covering your executive summary, programme description, marketing strategy, operations plan, and financial projections to map out your non-profit's financial needs and funding requirements.
• Maintain detailed financial records and transparency to meet regulatory standards for tax benefits and funder requirements, as some income streams may not qualify for tax exemptions and proper documentation is essential for ongoing compliance.

What is a non-profit organisation?

A non-profit organisation is a business that operates for charitable or social benefit rather than profit generation. Non-profit status provides specific financial advantages:

• Tax exemption: Your profits may be exempt from corporation tax, with the UK's main statutory exemptions for charitable companies detailed in the Corporation Tax Act 2010.
• Grant eligibility: Access to government and foundation funding
• Donation benefits: Donors can claim tax relief on contributions

Your specific benefits and tax obligations depend on your location. In the UK, check with His Majesty's Revenue and Customs (HMRC) and the Charity Commission to understand your entitlements and required non-profit accounting practices.

Legal structures for non-profit organisations

Choosing the right legal structure is a key first step. It affects how you operate, what funding you can get, and your legal responsibilities. Here are some common options in the UK.

Charitable incorporated organisation (CIO)

This structure is specifically for charities. It gives you the protection of a limited company but with simpler reporting requirements, as you only need to register with the Charity Commission.

Community interest company (CIC)

A CIC is a limited company that exists to benefit the community rather than private shareholders. It's a good choice if you plan to run your organisation like a business but want to lock in your social mission.

Unincorporated association

This is the simplest way to set up a group for a social purpose. It's not a separate legal entity, so members are personally liable. It's best for small groups with minimal assets or financial risk.

What's the difference between a charity and a non-profit?

People often use these terms interchangeably, but there's a key distinction. A non-profit is any organisation that uses its surplus funds to achieve its goals, rather than distributing them as profit.

A charity is a specific type of non-profit. To be a charity in the UK, your organisation must have purposes that are exclusively charitable and for the public benefit. You must also register with the Charity Commission if your income is over £5,000 a year. In short, all charities are non-profits, but not all non-profits qualify as charities.

Types of non-profit organisations

Charities

Charitable organisations provide services and support to the public. The qualification rules for charitable status differ between places, but they include religious, educational and scientific organisations or other public charities. For instance, a charity could be established to set up a school, a disease research centre or an animal rescue shelter.

Foundations

Like charities, foundations have a humanitarian outlook but they give funding or grants to other non-profit causes rather than raising money for their own initiatives. They're often set up by wealthy individuals with particular interests (for instance, helping travel writers from underrepresented backgrounds) or by for-profit companies to fund good causes (such as the Coca Cola Foundation).

Social advocacy

Social advocacy groups promote a social issue or cause. They may promote the causes of large groups of people, like human rights organisations, or smaller sections of society, like antisemitism campaign groups.

Membership organisations

You might set up a membership organisation to promote the collective interests of a particular group. These organisations represent professions, locations, hobbyists, activities or industries.

An example is the British Medical Association, which represents the medical profession. If you set up this kind of organisation, you usually charge membership fees to fund your activities.

Can you make money from a non-profit?

Yes, non-profit organisations can make money. Generating profit reduces your dependence on grants, donations and government funding.

The key difference is how you use profits:

• Prohibited: Distributing profits to owners or shareholders
• Required: Reinvesting all profits back into your mission through staff, projects or services. For instance, tax exemptions on capital gains are provided only if the gain is applied to charitable purposes.

How does a non-profit generate revenue?

Non-profit revenue generation ensures your organisation remains financially sustainable while pursuing its mission. Here are five proven methods to generate income:

1. Donations

Funding from individuals who support your cause and corporations seeking tax relief benefits. This provides unrestricted income you can use flexibly across your operations.

2. Grants

Funding from government bodies or private foundations that provides substantial financial support.

• Benefits: Large funding amounts for specific projects
• Requirements: Detailed reporting and financial transparency
• Tip: Consider hiring a grant writer if you're unfamiliar with applications

3. Fundraising events

Organised activities that generate income while raising your profile and attracting future donors. In the UK, profits from these activities may qualify for an exemption from tax under specific conditions.

• Examples: 5km runs, silent auctions, charity galas, sponsored challenges
• Benefit: Dual impact of immediate income plus ongoing donor relationships
• Consideration: Ensure event profits exceed organisational costs and time investment

4. Programme service fees

Consider introducing programme service fees, such as by providing a paid membership to your non-profit, as a way of raising income. This is often done by arts organisations, professional associations, and other types of non-profits to fund their services, such as a dog shelter charging an adoption fee to a prospective owner.

5. Corporate sponsorship and partnership

A corporation may offer to sponsor an event for you, provide ongoing cash income, or provide other assistance that saves you money. It can be a mutually beneficial relationship: the corporation gains positive visibility, and your non-profit receives valuable financial support.

How do I start a non-profit organisation?

Research and plan

Research and planning establishes your organisation's foundation and ensures long-term success. Follow these key steps:

1. Identify the need: Determine what social problem your non-profit will address
2. Conduct market research: Understand existing solutions and gaps in your area
3. Create your mission statement: Develop a clear purpose that guides all decisions
4. Set specific goals: Define measurable outcomes you want to achieve
5. Research requirements: Identify necessary permits and licences for your activities

Do the foundational work

Foundational work involves two critical decisions that shape your organisation's future:

Choose your name:Select something memorable that clearly communicates your mission and builds brand recognition.

Select your legal structure: Your choice affects taxation, liability and operational requirements. Common UK options include:

• Charitable incorporated organisation (CIO)
• Community interest company (CIC)
• Charitable trust
• Unincorporated association

Get professional advice to ensure you operate legally and access all available tax benefits.

Find a financial advisor with Xero's advisor directory.

Comply with the law

You now need to register your non-profit as a legal entity. During your registration you'll be given an identification number for your tax return.

In the UK, you'll get a Unique Taxpayer Reference (UTR).

You'll then need to apply for non-profit status to be eligible for tax exemptions and relief. Your local governmental body can tell you how to register your non-profit.

Create a business plan

A business plan maps out the financial needs of your non-profit so you can decide what to spend where, and how much you'll need to raise from different income streams.

Your business plan should address five essential areas:

• Executive summary: Your mission, community need, research findings and solution approach
• Programme description: Detailed services, products or programmes you'll offer, plus measurable impact goals
• Marketing strategy: Methods to reach your target audience and build brand recognition
• Operations plan: Team structure, role responsibilities and daily operational procedures
• Financial projections: Startup costs, budget, cash flow statements, revenue streams and operating expenses

You can get started with the free Xero business plan template.

Fundraising, budgeting and financial transparency

Sustainable funding requires strategic planning across multiple income streams and careful financial management.

Develop your funding mix:

• Identify your most viable income sources (grants, donations, events, partnerships)
• Create realistic budgets based on actual monthly cash flow needs
• Build financial reserves for high-cost periods and seasonal variations

Maintain financial transparency:

• Keep detailed, compliant financial records for funder requirements
• Prepare statements that demonstrate responsible money management
• Ensure all financial practices meet regulatory standards for tax benefits, as some income streams may not qualify. For example, if a charity arranges to share in future profits from land development, those profits will not be exempt from tax.

Start building your non-profit's presence

Once your business plans are ready, it's time to think about your outward-facing presence.

A clearly communicated and professionally presented website is great for anyone to understand your non-profit and what you stand for. Make sure your website clearly communicates your mission and goals so that the moment a funder, event attender, or community member clicks on your site, they know what your non-profit is for.

An active, brand-appropriate social media presence helps build your community and communicate your non-profit's aims and achievements. Though plenty of community engagement can happen online, it's also important to remember the impact of networking and meeting people in your community in real life too.

Before setting off on your marketing plan, carry out market research. Once you know who your target audience is, and how to reach them, you'll be able to craft a marketing strategy that builds your non-profit's presence, which could lead to increased donations and funding.

Ongoing management is important

Starting a non-profit is just the beginning; keeping it afloat is an ongoing process. Regularly assessing and evaluating your work can help keep your non-profit on track.

• Because non-profits have tighter finances than most businesses, you'll have to think creatively to attract the best talent (and keep them). You may also need volunteers to support you.
• Strong and supportive leadership is key to building a team and managing them effectively.
• Everyone who works for you needs to be clear of their roles, feel challenged and supported, and included in the non-profit's mission.

As your non-profit changes and adapts to opportunities and challenges, your business and employee strategy will need to follow suit. Use the strengths of your team to help you navigate these challenges and make your employees feel valued.

Are you ready to start your non-profit journey?

Starting your non-profit journey requires careful planning, legal compliance and professional financial management. Success depends on a solid business plan, effective team building and clear communication of your mission.

Professional financial management ensures you claim all available tax benefits and maintain the transparency funders expect. Xero's online accounting software for non-profits simplifies your financial processes, from tracking cash flow to generating compliant reports, giving you more time to focus on your mission.

FAQs on starting a non-profit organisation

Here are answers to some common questions about getting your non-profit off the ground.

What are some examples of successful non-profit organisations?

Well-known examples include large organisations like the National Trust and Oxfam, as well as smaller local groups like community sports clubs and animal shelters. They all operate to serve a public or social benefit.

How long does it take to register a non-profit in the UK?

Registration times vary depending on the structure. A simple unincorporated association needs no formal registration. Registering a CIC with Companies House can take a few days, while registering a CIO with the Charity Commission can take several months.

Do I need a board of directors for my non-profit?

Yes, most non-profit structures require a board of directors or trustees. Their role is to govern the organisation and ensure it stays true to its mission. For a CIC, you need at least one director. For a CIO, you need at least three trustees.

Can I pay myself a salary from my non-profit?

Yes, you can, as long as the salary is reasonable for the work you do and is in the best interests of the organisation. The rules are strict to prevent personal profit from undermining the non-profit's mission. Your governing document should outline the policy on paying board members or staff.

What ongoing reporting requirements do non-profits have?

Reporting depends on your structure and income. Most non-profits must file annual accounts and a confirmation statement with Companies House or an annual return with the Charity Commission. This ensures financial transparency and accountability to the public and your funders.