Legal obligations for charities in England & Wales: A practical compliance guide

The importance of compliance is increasing as charities face growing scrutiny over their fundraising, governance, data protection, and financial management. With over 185,000 charities registered in England and Wales, typically relying heavily on volunteers and limited resources, it is essential to understand which legal responsibilities apply and how to manage them effectively.

Our guide below, created in collaboration with Markel Law, outlines the key legal obligations that charities and community organisations may need to consider, helping to build strong processes and practices whilst reducing legal and operational risks.

What are a charity's legal obligations?

Charities operate under a combination of charity law and company law (where applicable), including legislation around data protection, employment, health and safety, and fundraising. The Charities Act 2022, featuring several updates from the 2011 Act in England and Wales, aimed to simplify some administrative processes whilst providing trustees with more flexibility to manage charities effectively. The 2022 Act has been implemented in stages from October 2022, with certain provisions coming into force on later commencement dates.

It is important for trustees to verify the current commencement position on legislation.gov.uk and use Charity Commission guidance before relying on specific provisions.

The obligations that your charity will need to meet may vary depending on the size, legal structure, activities, and staffing. However, every charity has a responsibility to act in the interests of its beneficiaries, manage funds and other resources responsibly, and comply with the laws regulating the charity sector.

The Charity Commission’s guidance states that you do not need to be an expert, but you must ensure that your charity complies with the law. To help you do this, take reasonable steps to find out what laws apply to your organisation – for example, by reading relevant guidance or by receiving appropriate professional advice.

In practice, this means trustees must comply with the core duties set out in the Charity Commission’s Essential Trustee guidance (CC3). These six duties are: (1) ensure the charity is carrying out its purposes for the public benefit; (2) comply with the charity’s governing document and the law; (3) act in the charity’s best interests; (4) manage the charity’s resources responsibly; (5) act with reasonable care and skill; and (6) ensure the charity is accountable.

Why compliance matters for charities

Compliance is about more than meeting regulatory requirements, as strong governance can help your charity’s leadership make better decisions, safeguard charitable assets, demonstrate effective governance, and maintain the confidence of donors, beneficiaries, and funding organisations.

Failing to comply with charity regulations may result in financial penalties, investigations by regulators, reputational damage, or the loss of funding opportunities. By incorporating compliance into day-to-day operations, you may also be able to identify risks earlier and respond more effectively as the charity grows.

Legal obligations for charities

Considering the factors outlined below can help to ensure your charity remains compliant with its obligations.

Understand your governing document

Every charity must operate under a governing document that explains its charitable purpose, powers, and decision-making arrangements.

Depending on the organisation, this may be a constitution, trust deed, articles of association, or another legal document. Trustees can benefit from reviewing it regularly to ensure that decisions the charity makes remain consistent with its objectives and powers.

The type of governing document generally follows the charity’s legal structure: unincorporated charities typically use a trust deed or constitution, charitable companies use articles of association and must register with both Companies House and the Charity Commission, and Charitable Incorporated Organisations (CIOs) use a CIO constitution and register only with the Charity Commission.

If you want to make changes to your charity’s activities, governance arrangements, or charitable purposes, you may need to obtain approval from the Charity Commission or alternative regulators where applicable.

Meet Charity Commission requirements

Charity regulations stipulate that organisations based in England and Wales must register with the Charity Commission if they have income over £5,000 per year – a Charitable Incorporated Organisation (CIO) must register regardless of its income. Some organisations are not required to register: exempt charities (such as certain universities and national museums listed in Schedule 3 of the Charities Act 2011) cannot register with the Charity Commission and are instead regulated by a principal regulator, whilst excepted charities (such as certain religious congregations and armed forces charitable funds below prescribed income thresholds) are not required to register but remain subject to the Commission’s regulatory oversight and to charity law. If the Commission identifies an eligible charity that has not registered, it will take action to secure compliance.

Most registered charities must comply with the Commission’s reporting requirements, which may include:

• Preparing annual accounts
• Producing an annual report
• Filing annual returns
• Reporting serious incidents where required
• Maintaining accurate trustee information

The specific reporting requirements depend on your charity’s income: charities with income over £10,000 must submit an annual return, those with income over £25,000 must have their accounts independently examined (or audited in some cases), and those with income over £1 million, or over £250,000 with assets exceeding £3.26 million, must have a statutory audit. All Charitable Incorporated Organisations (CIOs) must submit annual returns and file accounts with the Charity Commission regardless of their income level.

Keeping up-to-date records can help to demonstrate transparency and accountability whilst reducing the likelihood of compliance issues. Maintaining accurate accounts is also crucial as it can help your charity to show appropriate use of funds, monitor budgets, prepare grant reports, and support decision-making. Regularly reviewing your financial records can also allow you to identify unusual transactions or emerging financial pressures before they become significant issues.

Comply with fundraising regulations

Fundraising activities are governed by charity law, consumer protection legislation, and sector codes of practice. Under sections 162A to 162F of the Charities Act 2011 (inserted by the Charities (Protection and Social Investment) Act 2016), qualifying charities must include a statement describing their approach to fundraising in their annual reports, including the steps taken to protect vulnerable people and the public from unreasonable intrusion, undue pressure, or unreasonably persistent fundraising approaches. Written agreements with professional fundraisers or commercial participators must also include specific statutory statements. Charities collecting donations should also ensure that fundraising materials are transparent, treat supporters fairly, and respect individuals’ consent for communications in line with the UK GDPR, the Data Protection Act 2018, and the Privacy and Electronic Communications Regulations 2003.

Registration with the Fundraising Regulator is voluntary but encouraged, with charities asked to pay an annual levy when their fundraising costs exceed £100,000. Charities that register agree to follow the Code of Fundraising Practice, which sets standards on matters such as door-to-door and telephone fundraising, complaint handling, and protecting vulnerable donors. Charities should also be aware of the Fundraising Preference Service, which allows individuals to stop further contact from a named charity.

Organisations conducting public fundraising may also need to comply with local authority licensing requirements for activities and events. This can include street collection permits, lottery registrations, premises licences, food hygiene registration, and music licences.

Charity lotteries and raffles are separately regulated under the Gambling Act 2005. Lotteries with ticket sales exceeding £20,000 per draw, or £250,000 in a calendar year, require a licence from the Gambling Commission; smaller lotteries may register with their local authority.

Creating a fundraising strategy with transparent practices can help you to remain compliant whilst supporting long-term relationships with donors.

Charities should also consider financial crime risks, including fraud, money laundering, terrorist financing, and sanctions compliance, particularly where donations, overseas activities, or international payments are involved.

Conduct appropriate risk assessments

Managing risk is one of the core responsibilities in operating a charity, and conducting regular assessments to document risks and review mitigation measures can help charities identify hazards relating to:

• Staff and volunteers
• Public events
• Safeguarding*
• Property
• Cyber security
• Financial controls
• Health and safety

* Where charities work with children or vulnerable adults, trustees should ensure appropriate safeguarding arrangements are implemented and regularly reviewed.

Strengthen cyber security and protect personal data

If your charity collects and processes personal information from donors, beneficiaries, volunteers, or employees, you will generally need to comply with UK GDPR and Data Protection Act 2018 requirements, including providing privacy information and maintaining appropriate organisational and security measures. You can learn about the UK General Data Protection Regulation (UK GDPR) and Data Protection Act 2018 rules affecting charities in our guide to data protection for charities.

As charities increasingly engage in digital fundraising, protecting donors’ information has become an important part of managing risk. Cyber-attacks increasingly affect charities and can interrupt fundraising activities as well as expose sensitive personal information. Read about how to protect your charity in our guide to cyber security for charities.

Maintain strong governance

Effective governance can provide a solid foundation for a successful charity and help trustees to make informed decisions as circumstances change. Trustees can strengthen governance by holding regular meetings where decisions are recorded accurately, managing conflicts of interest proactively, and monitoring the charity’s financial performance closely. Reviewing organisational risks and delegating responsibilities appropriately can also help your charity to operate effectively.

Meet employment and volunteer obligations

Many charities rely on volunteers, however if you employ paid staff then you must comply with employment legislation, including the Employment Rights Act 1996, National Minimum Wage Act 1998, Working Time Regulations 1998, and Equality Act 2010, covering matters such as written contracts, working hours, equal treatment, pensions auto-enrolment under the Pensions Act 2008, payroll (including PAYE and National Insurance), and workplace policies. Charities working with children or vulnerable adults should also carry out appropriate Disclosure and Barring Service (DBS) checks for staff and volunteers undertaking regulated activity.

Although volunteers are not employees, organisations still owe them duties of care. You can enhance volunteers’ morale and build lasting relationships with them by providing clear role descriptions, safeguarding procedures, training, and appropriate supervision.

You can learn about how a volunteer agreement can benefit volunteer relationships in our dedicated article which features a volunteer agreement template.

Review website and digital compliance

Like many charities, your organisation may rely on websites to communicate with supporters, process donations, and recruit volunteers.

Ensuring your charity’s website follows good practice around user data, accessibility, and secure payment processing may include ensuring compliance with applicable accessibility requirements and recognised accessibility standards.

To learn more about website compliance, visit our dedicated guide, or read about steps to building a website for your charity and how to make your website accessible.

Review compliance regularly

Compliance is not a one-off exercise as your charity’s legal responsibilities may change over time as you recruit staff, introduce new fundraising methods, adopt new technology, or expand services.

Scheduling periodic governance reviews can help you to identify areas that require attention whilst ensuring policies and procedures remain appropriate for the charity’s operations and activities.

Seeking professional legal advice may also be valuable if your charity faces complex employment issues, governance changes, or regulatory investigations.

Manage insurance arrangements

Obtaining appropriate insurance forms an important part of risk management for charities. The type of cover your charity might require will depend on its activities, but you may want to consider protection including:

• Public liability insurance
• Employers' liability insurance *
• Trustee indemnity insurance **
• Professional indemnity insurance
• Cyber insurance
• Property insurance

*Employers’ liability insurance is a legal requirement under the Employers’ Liability (Compulsory Insurance) Act 1969 for any charity with paid employees, with a minimum of £5 million of cover, although charities engaging only volunteers are generally exempt. Certain exemptions may apply in limited circumstances.

**Trustee indemnity insurance is not a legal requirement, but trustees may purchase it using charity funds without Charity Commission consent provided the conditions in sections 189 to 190 of the Charities Act 2011 are met. In particular, under section 189(4), trustees must be satisfied that purchasing the insurance is in the best interests of the charity, and section 189(5) applies the duty of care in section 1(1) of the Trustee Act 2000 to that decision.

As with your charity’s broader obligations outlined above, regularly reviewing insurance arrangements can help to ensure cover remains appropriate for new services, fundraising activities, or operational risks. Insurance needs will depend on your charity's activities, legal structure, staffing arrangements and risk profile.

Discover more about charity insurance and legal expenses insurance to help safeguard your organisation.

Please note: This article provides guidance for information purposes only and has been created in collaboration with Markel Law. It should not be relied upon wholly when making or taking important business decisions. Always seek advice from an appropriately qualified legal professional where necessary.