Endowment

Endowment is money a charity is meant to keep, not spend. It usually arises from a gift or legacy given on terms that the capital be preserved so it can benefit the charity for the long term. That makes it a special kind of restricted fund, with its own accounting treatment.

A permanent endowment must be retained as capital, with generally only its income available to spend, whereas an expendable endowment can be converted to spendable income at the trustees’ discretion. (Source: Charities SORP; GOV.UK, Charity Commission guidance on charity funds, accessed 9 July 2026.) Charity law, as widened by the Charities Act 2022, gives trustees limited powers to spend or release permanent endowment in defined circumstances.

Account for endowment separately, follow the fund’s original terms, and take advice before touching the capital. Because it must be kept as capital, endowment does not count towards a charity’s free reserves. See how fund types fit together in the UK Charity Compliance Handbook.