Registered charitable businesses are exempt from most income tax, which includes:
- Donations
- Profits from sales
- Profits from property or investments
- Taxes on acquired properties
However, they do pay taxes on certain types of income such as land development profits, certain purchases and dividends obtained from companies.
Whether your charity generates income or not, you must prepare accounts each year and keep a record of your income, donations and outgoing expenses.
Charities with an annual income of over £5,000 need to register with the Charity Commission View gov.uk’s charity registration site and all registered charities are required to prepare an annual report.
If a charity’s income was above £10,000 (but above £5,000), the company must submit an Annual Update to the Charity Commission which details the business’s income.
Where a charity’s income is between £25,000 to £250,000 per year, it will be examined independently. Annual incomes that exceed £250,000 are subject to further scrutiny and more thorough examination by the Charity Commission and UK tax office.