As many charities are facing financial pressure, the Charity Commission has published a new guidance for grant making charities. The aim of this guidance is to assist trustees in making effective decisions regarding funding.
The updated guidance was released on 3 June 2026, which provided a detailed framework for those charities that distribute funds to other organisations. The guidance covers keys aspects such as the fundamentals of effective grant-making, setting funding priorities, carrying out due diligence, monitoring grants and reporting impact.
The Charity Commission has said that the new guidance should provide trustees with confidence when allocating funds.
In recent Charity Commission research, it was found that “grant-making charities awarded £17.84 billion in grants during 2024, up from £16.97 billion in 2023, which included £12 billion to other charities”. Although there has been an increase in grant making/funding, the Charity Commission has revealed that many organisations still experience financial difficulties.
One of the key changes is the clarification around unrestricted grants. The Charity Commission has made it clear that grant making charities can provide unrestricted grants to those charities who share the same purpose/s or purpose/s that are narrower than their own. This allows organisations in receipt of those funds greater flexibility on how funds are utilised. This includes operational costs and changes in beneficiary needs.
In addition, the guidance highlights the role of funding organisations that are not registered charities. This approach enables grant makers to reach underserved communities and therefore creating a wider impact on areas where fewer charities operate. Trustees should be reminded that additional risks may arise, and appropriate oversight may be required when dealing with funding non charitable organisations.
The guidance stresses the importance of accountability and due diligence. Trustees must ensure that appropriate administrative and operational checks are carried out, including checks on grant recipients. Other measures include monitoring the usage of funds, checking that the grant is genuine and ensuring that written agreements are in place. These measures are necessary for grant makers to carry out to guarantee that the funding is fit for their charitable purposes and that risks are managed properly.
In short, the Charity Commission’s latest guidance together with its analysis of the financial pressures on charities today highlights the importance of this guidance. This guidance comes at a critical time where charities are feeling that ‘financial squeeze’. The clarification provided to trustees is welcomed as it offers flexibility while maintaining strong governance to help navigate them through the challenges they face.
Should you require any further information or advice on grant making, please do not hesitate in contacting Khalid Sofi (Khalid.Sofi@LBMW.com), Faiza Mathaker (Faiza.Mathaker@LBMW.com) or Nicholas Thompson (Nicholas.Thompson@LBMW.com) in our Charity and Not-for-Profit department.