How Do UK Charities Make Money? 10 Ways to Raise Funds in 2026

Most UK charities do not fail because of a bad cause. They fail because they run out of money. Understanding where charity income actually comes from, what the UK rules are, and how to build a sustainable mix is the first step to building an organisation that lasts.

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In this article:

• How Do UK Charities Actually Make Money? (The Basics Explained)

• How Do UK Charities Make Money: 10 Ways to Raise Funds

• Recurring and Monthly Giving Programmes

• Charity Shops and Social Enterprise Models

• How UK Charities Can Make Money with Zeffy

• Revenue Streams at a Glance

• Frequently asked questions

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How Do UK Charities Actually Make Money? (The Basics Explained)

Before diving into specific revenue strategies, it is worth clearing up a common misconception: charities can and should generate income, and they can even operate with a surplus. What they cannot do is distribute that surplus to private individuals for personal gain. That single distinction separates a charity from a trading business.

Here is the short answer: a UK charity can absolutely generate revenue. Any income it raises must be reinvested to fulfil its charitable purposes, whether that means hiring staff, expanding programmes, building reserves, or improving infrastructure.

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What 'Charity' Actually Means in the UK

The term 'charity' in UK law refers to an organisation registered with the relevant charity regulator and operating exclusively for charitable purposes for the public benefit. Any income must be reinvested in that mission.

There are three charity regulators in the UK, and they are not interchangeable:

• Charity Commission for England and Wales (CCEW): Charities must register if their gross annual income exceeds £5,000. Charitable Incorporated Organisations (CIOs) register regardless of size. At least three unrelated trustees are required, and all filings are publicly searchable on the Charity Commission register. (Charity Commission)

• Office of the Scottish Charity Regulator (OSCR): All charities operating in Scotland must register regardless of size, even if already registered in E&W. (OSCR)

• Charity Commission for Northern Ireland (CCNI): Phased registration is ongoing; all NI charities must currently register. (CCNI)

UK charities are governed by trustees, not directors. Trustees are responsible for ensuring the charity operates within its objects and manages funds responsibly.

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The Separate HMRC Recognition Step

Registering with a charity regulator and being recognised by HMRC are two different steps. To reclaim Gift Aid, a charity must apply separately to HMRC and receive a Charities Reference Number via the Charities Online service. Without this recognition, a charity cannot claim Gift Aid regardless of its registration status.

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What If You Are Not a Registered Charity Yet?

Many community groups, CICs (Community Interest Companies), PTAs, and unincorporated associations raise money without being registered charities. They can absolutely fundraise, but there are important differences:

• Only registered charities recognised by HMRC can reclaim Gift Aid (25p for every £1 donated by a UK taxpayer).

• Only registered charities typically qualify for charity-tier discounts on platforms and services.

• CICs and unincorporated associations often pay standard commercial rates, which can make fundraising more expensive.

If your group is growing, it is worth exploring formal registration. The Charity Commission and OSCR both publish guidance on registration routes.

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Can a Charity Make a Surplus?

Yes. Building a revenue surplus is a sign of a financially healthy organisation. Charities are encouraged to maintain operating reserves, typically three to six months of expenses, to weather funding gaps or unexpected costs. Generating more income than you spend in a given year is good financial stewardship. Surplus funds must remain within the organisation and be used consistently with your charitable purposes.

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Trading Income and UK Charity Tax: What You Can and Cannot Do

Unlike in the United States, there is no 'Unrelated Business Income Tax' concept in UK charity law. However, HMRC does distinguish between different types of trading income:

• Primary purpose trading (directly furthering the charity's objects, for example a museum shop selling books about its collection) is generally exempt from Corporation Tax.

• Ancillary trading (incidental to the main purpose) is also generally exempt if it supports the primary purpose.

• Non-primary-purpose trading that exceeds HMRC's small trading tax exemption thresholds may be subject to Corporation Tax. In those cases, the standard approach is to set up a trading subsidiary that gift-aids its profits back to the parent charity, preserving the tax exemption.

VAT rules for charities are complex: there is a standard 20% rate, but charities benefit from a range of partial reliefs on advertising, fuel and power, and certain other categories. The Charity Tax Group is the independent technical reference for trustees on these matters.

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Two Broad Categories of Charity Income

Charity income generally falls into two categories:

• Contributed income: donations, grants, and gifts where no direct exchange of value occurs.

• Earned income: revenue generated through services, products, memberships, ticket sales, or other activities where value is exchanged.

Both are legitimate, and most financially resilient charities build a mix of both. According to NCVO, individual giving remains the largest single income source for most small-to-mid charities, but public grants, earned income (trading), and legacies together make up the majority of total UK sector income. Over-reliance on any single source, particularly competitive grants or one major donor, creates vulnerability. Diversifying your income mix is essential to long-term sustainability.

With that foundation in place, here are ten proven ways UK charities generate the income they need to grow and serve their missions.

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How Do UK Charities Make Money: 10 Ways to Raise Funds

1. Fundraising Events

Hosting fundraising events is one of the most popular and effective ways for charities to raise money. Events provide an engaging platform to spread awareness and connect with your community while generating income.

Some of the key benefits of hosting fundraising events include:

• Generating income through ticket sales

• Collecting additional donations during the ticketing process

• Selling food, merchandise, or other items during the event

• Facilitating in-person donations at the venue

• Running a raffle on the day

UK charities run a wide range of successful events: summer fetes, quiz nights, gala dinners, sponsored 5K runs, Macmillan Coffee Morning-style community gatherings, and school fundraiser evenings. One pattern from real UK charities is clear: per-ticket platform fees can quickly erode the margin on low-cost community event tickets. A £3 ticket with a 10% + £0.30 fee leaves very little for the cause.

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How to Run a Successful Fundraising Event

• Set clear goals: decide how much you aim to raise and what success looks like.

• Set a realistic budget: account for venue, catering, volunteers, and any technology costs.

• Understand your supporters: tailor the event format to what your audience will actually attend.

• Identify your donor types: consider whether you want to attract major donors, regular supporters, or a broad community audience.

• Assess available resources: volunteers, in-kind sponsorship, and existing relationships all affect what is achievable.

• Recruit volunteers: a smooth event typically requires more hands than you expect.

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Raffles and Lotteries: the UK-Specific Rules

Raffles are a popular and effective fundraising tool for UK charities, but they are regulated under the Gambling Act 2005. Most charity raffles are classified as small society lotteries, which means:

• Registration with your local licensing authority (council): £40 initial fee, £20 annual renewal.

• A single draw cap of £20,000 in ticket sales.

• An annual aggregate cap of £250,000 across all lotteries run by that society.

• At least 20% of proceeds must go directly to the cause.

• The maximum single prize is £25,000.

• A return must be submitted to the local authority within 3 months of the draw.

If your raffle is run entirely at an event (tickets sold and the draw completed at the same event), it is an incidental non-commercial lottery and needs no registration at all. This covers the classic fete raffle or dinner draw.

Important note: raffle ticket purchases are not Gift Aid eligible. The donor receives a chance to win, which counts as goods or services under HMRC rules. See full guidance from the Gambling Commission.

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2. Individual Donations

Individual donations are the most common and crucial source of income for UK charities. Donors support your mission across several categories: general supporters, regular givers, and major donors.

Some types of individual donations include:

• Online donations: via your online donation page or in-person at events.

• Event donations: gifts collected during or after fundraising events.

• Gifts in kind: physical donations such as food, clothing, or equipment. Charities must record their estimated value in their accounting.

• Shares: some donors transfer share holdings rather than cash.

• Planned gifts (legacies): larger donations made through a will or trust, often received after the donor passes away.

Charities should invest time in building a strong base of individual donors. A wide individual-donor base diversifies your income, spreads your message through supporters' networks, and creates the conditions for regular giving.

To attract and retain donors effectively:

• Implement a strong donor stewardship programme to build lasting relationships.

• Craft personalised appeals that reflect each donor's interests.

• Demonstrate the tangible impact their support has on your mission.

• Show appreciation through thank-you notes or small gestures.

• Maintain regular communication through email newsletters to keep donors engaged.

Gift Aid: the UK Reclaim Mechanism

Gift Aid is the central UK tax mechanism for individual donations. There is no equivalent of 'tax-deductible' in UK charity law for basic-rate taxpayers. Instead, the charity reclaims the tax.

Here is how it works:

• A UK taxpayer donates £100. The charity reclaims 25p for every £1, adding £25 to the gift at no extra cost to the donor. The charity receives £125 in total.

• The donor must sign a Gift Aid declaration confirming their name, home address, the charity's name, and that they are a UK taxpayer who has paid sufficient Income or Capital Gains Tax.

• Higher-rate (40%) and additional-rate (45%) taxpayers can claim the difference between the basic rate and their own rate through Self Assessment.

• The claim window is four years from the end of the financial period in which the donation was received.

• Declarations must be kept for at least six years after the last donation they cover.

See the official HMRC Gift Aid guidance for declaration requirements and how to claim.

Gift Aid Small Donations Scheme (GASDS): a lever many small charities overlook. Charities can claim a 25% top-up on small cash and contactless donations of £30 or less, without needing a written declaration. The cap is £8,000 in eligible small donations per tax year, yielding up to £2,000 in additional income. The charity must have been HMRC-recognised for at least two complete tax years to qualify. (Charity Tax Group)

One note on donor data: when collecting Gift Aid declarations and donor contact details, you need a lawful basis under UK GDPR and must comply with PECR before sending direct marketing. Seek guidance from the ICO (ico.org.uk) if you are unsure.

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3. Corporate Donations

Corporate donations are financial contributions from businesses for charitable or philanthropic purposes. In the UK, these can take several forms.

Corporate Gift Aid: when a company donates cash to a registered charity, it deducts the donation from its profits before calculating Corporation Tax. This is not a '25p reclaim' like individual Gift Aid; the benefit accrues to the company, not the charity. The charity still receives the gross gift.

Payroll Giving: an HMRC-administered scheme that lets employees donate directly from their pre-tax salary to any HMRC-recognised charity. Donations are deducted before Income Tax, so a 20% taxpayer donating £10 per month costs them only £8. The charity receives the full £10. Payroll Giving is more common at larger employers (banks, professional services firms) and schemes such as the Charities Trust facilitate it. See HMRC's guidance on charity tax reliefs for further detail.

Matching gift schemes: some UK employers match employee donations, though matching is less standardised in the UK than in the US. If you are targeting corporate support, it is worth asking major employer partners directly whether they operate a matched giving scheme.

Gifts in kind and in-kind sponsorships: companies can also donate goods or services rather than cash. Record their value as a gift in kind in your accounts.

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4. Grants

Grants are a significant income source for many UK charities. Unlike donations, grants are usually awarded for specific purposes and come with reporting requirements.

Here are the main categories of UK grants available to charities:

National Lottery Community Fund

The National Lottery Community Fund is the UK's largest grant-maker for community projects, distributing National Lottery proceeds to good causes across the UK. Grants range from small awards for local groups through to large strategic investments. Visit the NCVO grants guidance for an overview of how to find and apply for grants.

Arts and Culture Grants

Arts Council England, Creative Scotland, Arts Council of Wales, and Arts Council of Northern Ireland each fund arts, heritage, and cultural projects within their respective regions. Grants are available to registered charities, CICs, and unincorporated groups, depending on the specific fund.

UK Shared Prosperity Fund

The UK Shared Prosperity Fund (UKSPF) is a government programme distributed through local authorities. Charities and community organisations can apply for funding aligned with the local authority's investment plan.

Local Authority Grants

Many local councils administer their own grant programmes for community and charitable organisations. Contact your local authority or check their website for current rounds.

Independent Trusts and Foundations

A large number of independent charitable trusts and family foundations operate in the UK, supporting causes from health and education to the environment and community development. Examples include the Garfield Weston Foundation and the Esmée Fairbairn Foundation. Before applying to any funder, verify that their current round is open and that your work fits their criteria.

For a practical starting point, NCVO offers grants guidance for small charities, and Charity Excellence (a free UK charity community) has a grant-finding resource designed specifically for smaller organisations.

Note: Zeffy's Grant Finder is designed for the North American market. UK charities should use the free tools listed above rather than that product.

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5. Earned Income

Earned income refers to self-generated revenue from activities where value is exchanged. For UK charities, HMRC distinguishes between primary purpose trading (exempt from Corporation Tax when it directly furthers the charity's objects) and other trading income. Strong earned income strategies for UK charities include:

• Selling tickets to activities and programmes relevant to the mission.

• Running community classes and charging service fees.

• Hiring out village halls, community centres, or equipment your organisation owns.

• Offering training or consultancy in your area of expertise.

• Charging fee-for-service for programmes that deliver measurable outcomes, such as job training, counselling, or tutoring.

• Licensing curricula, methodologies, or branded content to other organisations.

Fee-for-service programmes are especially worth exploring. If your charity delivers a programme that produces results, local authorities, NHS trusts, or schools may pay you to deliver it to their communities. This turns your expertise into a reliable income stream.

Licensing is an underused option. If you have developed a training curriculum, a proprietary model, or a branded framework, you may be able to licence it to other charities or institutions for a fee.

The key distinction in UK charity law: income from primary purpose trading is generally Corporation Tax exempt. If trading moves outside your charitable objects and exceeds HMRC's small trading exemption, the standard approach is a trading subsidiary that gift-aids its profits back to the charity. The Charity Tax Group publishes the relevant thresholds and guidance.

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6. Corporate Sponsorships and Partnerships

Corporate sponsorships offer a classic arrangement: your charity gains income while your partner business gains community goodwill and brand visibility. There are three main types:

Financial Sponsorships

The most common type, where a company directly funds your programme or event. The value of the sponsorship typically reflects the level of exposure provided.

Gifts in Kind Sponsorship

A company provides goods or services rather than cash. This might mean catering for a gala dinner, prizes for a raffle, or printing for your event materials. Agree on what you need and acknowledge sponsors clearly during the event.

Media Sponsorships

Partnering with local print, radio, or community media outlets to promote your event. You gain reach; the media partner gains positive association with your cause.

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7. Membership Programmes

Membership programmes are an excellent source of sustainable income. Many UK charities and community organisations use them to build a loyal base of supporters who pay regular dues in return for benefits and exclusive access.

With an active membership base, you have a predictable income stream. Members are often your most engaged supporters and are more likely to donate additionally, volunteer, and recruit others.

Here are the key considerations for UK membership programmes:

Membership Tiers

Consider offering different tiers, each with its own benefits. This might start with a members-only newsletter, rise to exclusive merchandise, and culminate in VIP event access. Graduated tiers encourage more people to join and make it easier to upgrade existing members over time.

Membership Perks

Nobody will join unless you offer something of genuine value. Early-bird event booking, reserved seating, member discounts from partner businesses, and access to exclusive content all work well for UK charities.

Membership Fees

Set a fee that is sustainable for your organisation and reasonable for your supporters. Factor in your target number of members, the cost of any benefits, and your income goal for the programme.

UK context: organisations such as the National Trust and the RSPB have built their operations in part around millions of paying members. PTAs, sports clubs, U3A groups, and museum Friends schemes all use membership models effectively at a smaller scale. Sports clubs that register as Community Amateur Sports Clubs (CASCs) with HMRC may also access Gift Aid-adjacent reliefs, verify current HMRC guidance on CASCs before relying on this.

Important: membership fees that confer benefits of material value to the member are not Gift Aid eligible. The Gift Aid mechanism requires that the donor receives nothing of material value in return. If your membership includes significant benefits, the Gift Aid element would apply only to any donation made separately above the membership fee.

Zeffy's free charity membership software makes managing memberships straightforward. You can create customisable membership forms, set multiple tiers, offer automatic renewals, and more.

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8. Merchandise and Products

Charities can generate consistent earned income by selling merchandise and products aligned with their mission. UK charity retail is a well-established sector: Oxfam operates around 500 shops, Cancer Research UK and British Heart Foundation are among the largest charity retailers in the country, and countless smaller charities run shops, stalls, and online offerings.

If you have an in-person presence, branded merchandise and event retail are natural opportunities. Churches and community groups regularly sell merchandise, food, and drinks at events including family game nights, quiz nights, talent shows, and fetes.

With Zeffy, organisations can set up and manage an online shop entirely free of charge. Zeffy's free tap-to-pay feature also lets charities accept contactless payments for goods sold at events or physical locations, which matters more than ever as cash becomes less common at community fundraisers.

UK-specific note: registered charities occupying premises used for charitable purposes receive 80% mandatory relief on business rates. The remaining 20% may be granted as discretionary relief by the local authority. This is a material saving for charities running a shop or community space. The Charity Tax Group covers the detail.

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9. Investments

For charities with available reserves, investing is a legitimate income source, though it requires proper governance. Like an individual investor, a charity can hold investments in equities, bonds, or other securities to generate income. Charities generally do not pay UK Income Tax or Capital Gains Tax on investment returns, provided the investments align with their objects and no private benefit results.

Key investment vehicles for UK charities include:

• Endowments (permanent endowments): funds invested to generate income for the charity's programmes. In UK charity law, the term 'permanent endowment' has a specific meaning under the Charities Act 2011, restricting the spending of capital. Trustees must understand the restrictions that apply before drawing on endowment income.

• Reserve funds: funds set aside for emergencies or unexpected costs, which may be invested to maintain their value over time.

• Equity and bond portfolios: charities can invest in equities to generate dividends or in bonds for income, subject to the trustees' investment policy. Investments must not confer any benefit on trustees or connected persons.

Trustees have a legal duty to take appropriate investment advice and act in the charity's best interests. The Charity Commission guidance covers investment responsibilities.

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10. Publicity and Digital Reach

Even for charities, visibility is essential. Advertising campaigns require upfront investment but typically deliver strong returns for charitable organisations, both in donations raised and in awareness built.

Google Ad Grants: Google offers eligible charities up to approximately £7,500 per month in free Google Search advertising through its Ad Grants programme. UK charities access this through TechSoup UK validation, you register with TechSoup UK to verify your charity status before applying through Google for Nonprofits. This is a genuine free resource that many small UK charities are not using. Verify the current grant amount and application steps on the Google for Nonprofits page.

Other low-cost reach options for UK charities include the Charity Digital tools discount programme and Google's broader suite of Nonprofit tools.

Building an engaged email list and posting consistently on social media remains one of the most cost-effective ways to convert supporters into donors over time.

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Recurring and Monthly Giving Programmes

One of the most reliable ways UK charities build financial stability is not a new income stream. It is a different way of structuring the donations they are already collecting. Recurring giving programmes turn one-time donors into monthly contributors, creating predictable income you can actually plan around.

The difference between a one-time gift and a monthly gift is significant over time. A donor who gives £50 once contributes £50 to your mission. That same donor enrolled in a £20-per-month regular giving programme contributes £240 over the course of a year and often stays engaged for several years.

Recurring giving also reduces fundraising fatigue. Instead of asking the same donors repeatedly throughout the year, a well-run regular giving programme lets you make one strong ask, then focus your energy on delivering the mission and reporting back on impact.

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How to Launch a Recurring Giving Programme

Setting up a regular giving programme does not require complex infrastructure. The essentials are:

• A donation form that offers monthly giving as the default or prominently featured option.

• A simple way for donors to manage or pause their giving without contacting you.

• A communication plan that keeps monthly donors informed about their cumulative impact.

Framing matters. Rather than asking donors to 'set up a recurring gift', ask them to 'join your regular giving community' or 'become a sustaining supporter'. Positioning regular donors as a distinct, valued group increases both sign-up rates and retention.

Zeffy's free donation forms let you enable recurring giving in minutes, with no transaction fees taken from any gift. Donors can give monthly, quarterly, or annually, and your team gets real-time visibility into active subscriptions.

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Upgrading Existing Donors to Monthly Giving

Your warmest prospects for regular giving are people who have already given to you. A targeted upgrade campaign, sent by email or post, focused specifically on converting past donors to monthly status is one of the highest-return moves a charity can make. Keep the ask specific: 'Your £25 per month would cover X for a full year' converts better than a generic recurring ask.

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Charity Shops and Social Enterprise Models

Selling branded merchandise is one way to generate earned income. Running a charity shop or social enterprise is a bigger commitment, but for organisations that do it well, it can become one of their most stable and mission-aligned income streams.

UK charity retail is a well-established sector. Oxfam operates around 500 UK shops; British Heart Foundation is one of the country's largest charity retailers. Those shops advance the mission directly: Oxfam uses retail income to fund global development work, while organisations like BHF use shop revenue to fund research. The alignment between revenue model and mission is exactly what makes social enterprise work for charities.

You do not need national-charity scale to make this model work. Many small and mid-sized charities operate charity shops, resale boutiques, or community enterprises that generate consistent earned income while engaging their volunteer networks.

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What Counts as a Social Enterprise?

A social enterprise is any revenue-generating activity structured to advance the organisation's mission. For UK charities, common models include:

• Charity retail shops: accept donated goods, sell them to the public, and use proceeds to fund programmes. Many also employ people from the communities they serve.

• Cafes or catering operations: common among organisations supporting people experiencing homelessness or recovering from addiction, where the operation itself provides employment and skills training.

• Training-to-employment programmes: charities charge employers a placement or training fee for graduates of their workforce development programmes.

• Mission-aligned product lines: a conservation charity selling sustainably sourced goods, or a foodbank operating a community market.

The Community Interest Company (CIC) structure is commonly used in the UK for social enterprises that sit alongside, or in place of, a registered charity. A CIC has a statutory community benefit lock (an asset lock), which can reassure funders and local authorities.

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Key Considerations Before You Start

A social enterprise requires upfront investment, operational capacity, and a clear connection to your mission. Before launching one, work through these questions:

• Does this activity connect to our charitable objects, or could it generate non-primary-purpose trading taxable income?

• Do we have the staff, volunteers, or partners to run it consistently?

• What is the break-even point, and how long can we sustain it before it becomes self-funding?

• Does this model create value for the people we serve, or only for our income line?

The most successful charity social enterprises are not separate businesses bolted on to a charity. They are mission-delivery mechanisms that happen to generate income. Social Enterprise UK is the sector body and publishes guidance on legal structures and models.

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How UK Charities Can Make Money with Zeffy

Maximising fundraising income is essential for charities to sustain and expand their impact. With Zeffy's free fundraising platform, organisations can significantly increase their income without paying any platform or transaction fees.

Zeffy empowers charities to create customisable donation forms, manage donor relationships, and sell event tickets at no cost. Every pound raised by your organisation goes directly towards your cause. More than 100,000 charities and nonprofits have raised over £2 billion through Zeffy, with zero fees taken from any of it.

Zeffy supports Gift Aid handling, UK-compliant fundraising forms, and contactless tap-to-pay for in-person giving at events. With Zeffy's tools and zero-fee approach, charities can allocate more resources towards their core programmes and make a greater difference in the communities they serve.

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Revenue Streams at a Glance

Use this table to quickly compare all ten income streams by effort level, income potential, time to first pound, and which organisation types they suit best.

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No single stream is right for every organisation. Start with what fits your current capacity, then layer in additional streams as your team and resources grow.

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Frequently asked questions

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