Bank accounts for charities in the UK 2023
Looking for a bank account for your charity but not quite sure of where to start? Here are a few tips that may help.
Opening a bank account for a charity is quite similar to opening a bank account for a small business.
It is also an essential step when initially setting up your charity, allowing you to properly manage all things money. This guide focuses on current accounts and everyday banking for charities. We have a separate guide on comparing savings accounts for charities.
Compare bank accounts for charities
Can I use a personal account for a charity?
No, you can’t. Just like a limited company, a charity is an independent legal entity, so its finances should be managed separately.
Moreover, when you apply to register your organisation with the Charity Commission, you will be asked for its bank account details, among other things.
Having a dedicated bank account will also makes things easier for you: you will be able to keep track of the charity’s money without having to sift through your personal transactions and account statements.
Latest reviews of bank accounts for charities
What are charity bank accounts?
Bank accounts for charities operate like business accounts – they enable organisations to manage their finances separately from the personal finances of their directors, or in the case of charities, their trustees.
Many high-street and online banks offer accounts specifically for charities. There are also a handful of financial services providers who mainly look after charities or social enterprises.
By law, any charity that receives at least £5,000 per year has to be registered with the Charity Commission, the regulator which oversees the charitable sector in the UK. All registered charities must have their own bank account.
But if your charitable organisation is just starting up, you won’t necessarily need to set up a separate bank account for it until it starts to raise income up to the £5,000 per year mark.
Are bank accounts for charities free?
It depends on the bank and on how big your charity is, but it will be hard to find an account that is completely free. Still, charity bank accounts are usually cheaper than standard business accounts.
Some of the fees your organisation might incur are:
- Monthly fee. This is just a fixed monthly fee to keep the account open. If your charity has a comparatively low annual turnover, you should be able to find a charity account that does not charge it.
- Foreign transaction fee. Most banks will charge you a fee if you use your debit card to make payments or withdraw cash from an ATM outside the UK.
- Depositing cash. Some bank accounts may charge you to deposit cash into the account, especially if you go beyond a certain limit.
- International bank transfers. Sending money abroad from your UK charity account is also unlikely to be free.
- Overdraft. If your account offers an overdraft, it will come at a certain interest rate. You should really avoid using it if possible, they’re hardly good value for money.
- Cheques. There may be fees for issuing or paying in cheques.
This is just an overview of the most common fees; you should always check your charity account’s fees document carefully before applying.
What features do charity bank accounts offer?
As you would expect, charity bank account features will vary depending on the bank offering the account. But many such account usually include the following common features:
- Debit card. As with a current or business account, a charity account can come with a debit card to make it easier for charities to make purchases of supplies or relevant services.
- Dedicated relationship managers. Many banks offer a relationship manager for the account holders, in a similar way to business account holders.
- Certain number of free transactions. As with many business accounts, charity account holders can enjoy a certain number of transactions free of charge.
- Cash counting machines. Some banks enable their charity customers to take donations in coins and banknotes in-branch to put them through counting machines and then deposit them into the account.
- Limited free deposits and withdrawals. These monthly limits will usually cover a number of payments or a set amount.
- Cashback. Some accounts offer cashback on certain types of purchase.
- Overdraft functions. Some banks offer their charity customers limited short-term borrowing facilities.
How to find the best bank account for a charity
While it may seem more stressful and complicated, opening a bank account for a business or a charity is not that different from opening a personal current account. Which also means that there is no one-size-fits-all solution; you will need to find an account that works for your organisation and management style.
Here are some tips on how to go about picking your charity’s bank account:
- Think about what you need.Try and picture how you will be using the account. What transactions will you need to make? How often? How many people will they need access to it?
- Compare many different options. There are more charity accounts than you might think out there; don’t stop at the first or second you see. Actually take the time to compare and contrast options instead.
- Fees. This is of course the main thing to consider. As a charity, chances are that money will be tight, and you don’t want to waste it on banking fees. Calculate how much the account is likely to cost you in a year.
- Ways to bank. Some banks will have branches and allow you to sort things out in person; others will be much more online and mobile focused. What suits you best?
- Eligibility criteria. You want to check them carefully before starting your application in order not to waste time.
- Account features. Apart from all the standard stuff, what else does the account offer? For example, will you be able to accept card payments if you need to? Can it help with budgeting and accounting?
- Other banking products. Opening a current account is the first step, but you might need other banking services in the near future (such as savings accounts). See what else the bank you are considering can offer to your charity.
- Read the terms and conditions carefully. It’s tedious, but don’t skip this step. You don’t want any surprises down the line.
One more thing to keep in mind is that there are different types of banks offering charity accounts. There are traditional banks (think Lloyds and the like), which list them under their business account section as “community accounts”.
Then there are challenger or digital-only banks, which will not usually have dedicated charity accounts but still sometimes accept applications from charities for their standard business accounts (and can be quite cheap too).
Finally, there are financial companies that specialise in charities, such as Charities Aid Foundation, which is the biggest provider of charity banking services and a charity itself.
How to open a charity bank account
Depending on the bank, you might be able to open a charity bank account online or need to do it in person. You will usually need to provide:
- Details and documents of your charity. Depending on your charity’s structure, these may vary; you might have to give your charity registration and Companies House numbers, or if you don’t have them, your organisation’s constitution documents.
- Details of people involved. Normally at least two trustees as well as any other signatories on the account. You will need to give their personal details, proof of identity and proof of address.
Who manages a charity bank account?
Like a regular business account, a charity bank account (sometimes known as a community account), will have one or more signatories. These are people who can authorise withdrawals and payments on behalf of the organisation. It is usually a good idea for a charity’s treasurer or finance director to be in charge of managing the account.
The Charity Commission states that “where practicable”, bank mandates should need 2 signatories, one of whom is a trustee. But the commission acknowledges that some charities may allow for low-value amounts to be authorised by just one individual. It’s important to get familiar with all the commission’s rules on banking before opening an account.
How are charity bank accounts treated for tax purposes?
Charities don’t pay tax on most types of income (as long as the income is spent on recognised charitable purposes). But they can claim gift aid, which is a scheme which allows charities to reclaim any tax paid on donations given by UK taxpayers.
So being able to manage all this within a charity bank account is very important. As with businesses, charities still need to submit annual accounts and tax returns, even if they pay little or no tax. So again, using a single account to manage all of the incoming and outgoing payments is vital.
Pros and cons of opening a charity bank account
- As an independent legal entity, your charity needs a bank account.
- Opening a new account allows you to separate the charity finances from your personal cash.
- Some suitable business accounts can be opened and managed online, or via a banking app.
- Bank accounts for small businesses and charities usually aren’t free and can come with a range of irritating transaction fees.
- Slightly more banking administration, especially if you go via two different banks for your personal and charity accounts.
As an independent legal entity, a charity must have its own bank account. Not only is this a requirement for getting your charity registered with the Charity Commission, it also helps you to separate the charity’s finances from your own.
The process for setting up a bank account for a charity is similar to opening an account for a small business. It’s likely that the bank account will charge fees, both for certain transactions and for general account management. It’s a good idea to shop around to find an account that suit’s your organisation’s needs.
For example, if you receive donations in cash, it may be helpful to open an account with a bank that has a sizeable network of physical branches in your area so you can make regular cash deposits.
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