DAFs vs. Private Charitable Trusts: A Guide for UK Philanthropists
By Kate Millar, The Voltaire Review
Choosing the right charitable vehicle can feel like juggling a thousand porcelain plates - each marked with tax codes, legal frameworks, legacy goals, and a dozen competing priorities. But with the right structure in place, philanthropic giving can become not just simpler, but far more powerful.
Whether you're looking to establish a lasting legacy, streamline your giving, or begin immediately with minimal complexity, this guide compares two leading UK options: the Donor‑Advised Fund (DAF) and the private charitable trust, and how, with careful planning, you might not need to choose between them at all.
Vehicle Overview
Donor‑Advised Fund (DAF)
A DAF is a giving account hosted by an established UK charity, such as the Charities Aid Foundation (CAF) or Bishopsgate Foundation. You contribute cash, shares, or property, claim Gift Aid and income‑tax relief, then recommend grants to UK‑registered or approved overseas charities at your pace.
Private Charitable Trust
A private charitable trust (often set up as a Charitable Incorporated Organisation or charitable company) is your own legal entity. You endow it directly, appoint trustees (often family members), and oversee its grant‑making, governance, and annual compliance with the Charity Commission.
Pros & Cons
Differentiating between DAFs & Private Charitable Trusts
3. Who Should Choose Which?
DAF Ideal For
First‑time donors seeking immediate Gift Aid and Income Tax relief.
Flexible timing: Gifts now, decisions later.
Private giving: Maintain discretion.
Minimal admin: No trustee meetings or annual filings.
Trust Ideal For
Long‑term legacy: Engage multiple generations as trustees.
Complex programmes: Scholarships, programme‑related investments, direct projects.
Public profile: Desire for institutional branding and transparency.
Large endowments: When assets exceed £5–10 million, fixed costs become proportionally smaller.
4. The Hybrid Approach: DAF + Trust Pipeline
Why wait six months? While your Charitable Incorporated Organisation is establishing and registering with the Charity Commission, you can launch a DAF today, unlocking immediate tax benefits and beginning strategic grant‑making without delay.
Immediate Impact: Claim Gift Aid and Income Tax relief in the current tax year.
Operational Ease: Use the DAF for general grants, while designing your trust’s bespoke programmes.
Seamless Transition: Once your trust is live, transfer residual DAF assets or operate both vehicles side by side, each serving different needs.
5. Additional UK‑Specific Considerations
Gift Aid: Automatically claimed on cash gifts; reclaim higher‑rate relief through personal tax returns.
Asset Acceptance: DAF sponsors accept shares and certain property; trusts can hold a broader asset mix, including land and real estate.
Regulatory Compliance: DAFs rely on sponsor due diligence; trusts file Form ChA1 and annual returns with the Charity Commission.
Investment Options: DAF investment pools often include ethical or ESG funds; trusts can appoint bespoke investment managers.
6. Conclusion
For UK high‑net‑worth families, DAFs offer unparalleled speed, simplicity, and privacy—ideal for rapid, tax‑efficient giving. Private charitable trusts deliver control, legacy and public presence, suited for multi‑generational philanthropy and complex initiatives. By launching a DAF immediately and building your trust in parallel, you combine the best of both worlds: instant impact today and institutional depth for tomorrow’s legacy.
At Voltaire, we guide you through every step, ensuring your generosity is as sophisticated as your wealth.
