Charity Commission updates grant-making guidance

A lot of people think of charities as groups that deliver services directly, from food banks to advice lines. But thousands of charities do their work in a quieter way: they give money to other organisations so those groups can reach people on the ground. That is why the Charity Commission’s new guidance on grant-making matters. The update arrives at a tense moment for the sector. The regulator says parts of charity life across England and Wales are facing a third straight year of financial pressure, even as demand for support has risen sharply. So this is not just a paperwork change. It is guidance about how money can move faster, more safely and with fewer unnecessary restrictions.

According to the Charity Commission’s analysis of 2024 annual returns, grant-making charities awarded £17.84 billion in grants during 2024, up from £16.97 billion in 2023. Of that, £12 billion went to other charities. The regulator also found that 32,661 charities reported some grant-making activity, and 20,672 said it was their main activity, accounting for 83% of grant funding. Those numbers matter because they show how much of the sector depends on one charity trusting another to do the work well. At the same time, the Commission’s public trust research recorded a three-fold rise in demand for charity services across England and Wales. More need, tighter budgets and rising costs make every funding decision heavier.

The new guidance replaces and expands earlier advice so that it now covers all grant-making. In practical terms, it walks trustees through the basics: setting funding priorities, checking who they are giving money to, keeping an eye on what happens next and reporting the difference the grant makes. If you are new to this subject, that may sound obvious. But it answers a very practical question: what does responsible generosity look like? The Commission says the update is part of its wider work to support effective philanthropy across England and Wales under its five-year strategy, which is another way of saying it wants giving to be both confident and accountable.

One of the clearest changes is around unrestricted funding. The Charity Commission now states more plainly that grant-making charities can give unrestricted grants to charities whose purposes are the same as, or narrower than, their own. That matters because unrestricted funding gives the receiving charity room to decide what it needs most. The money still has to be used to further the charity’s purposes, but it does not have to be tied to one narrow project line by line. In real life, that can mean covering rent, staff time, energy bills or a sudden change in local need. For many charities, those core costs are exactly what keep the doors open.

The guidance also says charities can fund organisations that are not charities. That may sound surprising at first, but it can be a sensible way to reach people who are being missed, especially in places where there are very few charities operating. A community group, social enterprise or other local organisation may sometimes be the one with the relationships and knowledge to get help where it needs to go. But the Commission is careful here for a reason. Non-charities are less regulated, so trustees are expected to take reasonable steps to assess and manage the risks. In plain terms, being open-minded about who can deliver impact does not mean being casual about public trust.

That is where due diligence comes in. The regulator expects charities to carry out proper checks on potential recipients, including understanding how the organisation works, checking that it is genuine and deciding whether the grant can be monitored properly. There also needs to be a written agreement in every case, and charities should monitor it so they know the recipient is meeting the agreed terms. This is worth pausing on, because due diligence can sound like technical language for lawyers. Really, it is about asking careful questions before money goes out the door, then keeping enough oversight in place to know the terms are being met. In a sector under financial strain, that kind of discipline protects both beneficiaries and the reputation of the charity making the grant.

Mazeda Alam, the Charity Commission’s Head of Trustee Guidance, framed the update as a response to a hard truth: many charities are struggling to keep services running at the very moment communities depend on them more. She also pointed to a problem many organisations know well but do not always see reflected in funding decisions: core costs are difficult to fund, even though they make front-line work possible. The bigger lesson from this guidance is simple. Trustees are being told they can make decisions that are both bold and careful, as long as they keep returning to one test: will this grant further the charity’s purpose and help the people it exists to serve? For anyone trying to understand how charity funding works, that is the real story here. Good grant-making is not just about giving money away. It is about giving it in a way that is trusted, flexible and useful. The full guidance is published by the Charity Commission on GOV.UK.