There are many things to mull over when setting up a charitable organisation or society, and the bank account you're going to use to manage your finances should be near the top of the list.
Charity banking current accounts run along the similar lines as personal current accounts, as they can sort out any payments you need to make, manage incomings (like donations) and keep watch of your cash flow.
The major difference is that it's not just your incomings and outgoings included, but your charity's - meaning there will be a constant stream of transactions to monitor.
It goes without saying that - while not the only factor - charity bank accounts have a big say on how well your organisation does. As such, it's crucial that you make a charity bank account comparison.
Work out why you need a charity account
If you're planning to employ anyone (which is likely as it's hard to run a charity all by yourself...) you'll need to pay them. Doing that without an account would be tricky!
Bank accounts for charities are also allowed to receive favourable tax treatment, provided you are recognised by HMRC as a charitable organisation. To profit from this handy exemption, you should fill out a ChA1 form and send it to HMRC Charities.
When you are recognised as a charity you will be able to get interest paid gross of tax by contacting your bank.
Claim tax back on Gift Aid donations
In addition to getting back tax paid on interest, it's also possible to reclaim it on Gift Aid donations once you're accepted as a charity by HMRC.
You can retrieve Gift Aid tax in three ways, including claiming online using HMRC's online form, setting up and claiming through a database which you setup (if you have thousands of donations) and with a paper form, the ChR1. If you need to use the form, contact HMRC to order one. You can find out more about each option by heading to HMRC's website.
Decide who will manage your charity's bank account
It's a good idea to have a number of people outlined as signatories for your charity's bank account so that it's easier to spread responsibility for signing cheques and managing it.
It's good practice to have at least two people sign every cheque so that you don't leave your charity open to fraud or mismanagement.
It's important that you choose someone in your charity to act as an authorised official, with another person chosen as a nominee.
Once chosen, these people can make repayment claims for your organisation. You should pick them before applying with your ChA1 form, so that you can include their details on it.
Earn interest on your money
Charity accounts UK are notorious for offering poor interest rates, so to get the best possible return you can on your money, you must compare charity bank accounts.
This will help you not only find out what the best rates are, but also which banks have a history of offering good rates to charities.
If you go simply for highest rates but don't check what other features come with it - such as whether you'll have access to credit or be able to use an overdraft - you might be missing out on the best charity bank account for your needs.
Are charity bank accounts free?
When opening a charity bank account, whether you're charged or not for using one not only depends on the bank, but also your charity's situation.
If your turnover is less than a set amount, banks may offer accounts which are designed for organisations like this, with low incomes.
While they may be free to use to run your charity (subject to certain conditions, such as not going overdrawn) when it comes to other services, like BACS or Bulk Payments, you could be charged for using them.
After setting up a bank account, if you start to earn greater revenues that exceed limits set for the charity account, you may need to switch to a more traditional business account. These are generally free for a set period, after which you will have to pay to keep it running.
How you can find a good charity bank account
When searching for an account you need to cut through the jargon and make sure you really understand what's being offered. Think about key aspects, like:
How easy will the account be to run - are you near a branch, or can you manage it online and over the phone?
Will you ever need to pay for simple things like paying in cash, cheques or standing orders and withdrawing money?
How will interest be paid on your balance?
What's the bank's support structure like - will you get a manager to work with?
Would you open multiple accounts, or stick to one?
These are just some of the things to consider when comparing charity accounts, so it's important that you do your research. Most banks now have dedicated charity teams that can help answer your questions and may raise issues that you hadn't thought about.
The benefits of charity banking
Aside from offering you the chance to keep your charity's finances in check, one of the benefits that can come from having a charity account is working with a dedicated relationship manager.
They'll be able to support you when it comes to managing your money, borrowing cash if you need to and making sure your account is working for you.
Although there will be conditions attached, another benefit of charity accounts is you may be able to access an overdraft or loans and credit if you need to - though you must talk to the bank to check whether this is doable, as you don't want to be in a situation where you need credit but can't get it!
Switch your charity account
If you've already got your account running but feel the need to switch - maybe you're not happy with the service or want to put off paying fees - it is possible to move banks.
If you know where you want to go, you should check how to switch to the new bank either online or in branch and make sure you have important details for you and your charity to hand so the process isn't delayed.
The move shouldn't take long to complete and once it is, you could benefit from free banking for a period of time as thanks from your new bank.
Earn interest on your charity's savings
While a current account can help you run your organisation efficiently, you still may find it hard to earn much interest. That's why, if you are able to, you should think about setting up a charity savings account as well.
This way you can deposit any surplus money and make it work harder, potentially earning a much better rate of interest.
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