The authors of this article examine the differences, advantages and costs of two broadly different structures for philanthropy.

The following article from, Katya Vagner, a partner at law firm Fladgate, looks at how UK-based high net worth individuals choose between charitable foundations and donor-advised funds (DAFs) as part of their broader wealth and legacy planning.

DAFs, which are a large sector in the US (see a recent article here), are also developing in the UK. Vagner notes that giving from DAFs is rising rapidly, driven by demand for a flexible and simple approach. DAFs are, so their advocates point out, protective of the donor’s anonymity – an important feature when privacy is sometimes at risk. There are practical and regulatory trade-offs between DAFs and foundations, especially for individuals having to manage succession, estate planning, or preparing for significant liquidity events. 

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For individuals and companies wanting to make a lasting impact, the instinct is often to set up a private charitable foundation. These structures, typically charitable companies or trusts, are designed to manage long-term giving. However, donor advised funds (DAFs) are an increasingly popular alternative as a philanthropic giving vehicle, with contributions to DAFs in 2023 reaching £852.6 million and charitable assets under management in UK DAFs totalling £2.8 billion (1).  

A DAF is a dedicated account administered by a third-party charity that allows donors to make contributions and recommend grants to selected charitable causes. Donors can contribute a variety of assets to the DAF, including cash, shares, property and artwork. 

Both options offer ways to support charitable causes and similar tax benefits, but they differ in structure, administration, and ongoing responsibilities – a distinction outlined in the table below.

Key characteristics of DAFs vs Charitable Foundations

Setup speed and administrative burden
DAFs can typically be established within days and, in urgent cases, within hours. Conversely, setting up a charitable foundation generally requires several months, especially if the Charity Commission raises any queries as it is currently taking a minimum of two months to respond to applications and registrations. In many cases. it can take considerably longer. 

Another notable feature of DAFs is their flexibility in estate planning. Donors can leave a portion of their estate to a DAF in their will, even if they haven’t opened an account during their lifetime. While it is possible to instruct executors to set up a charity after death, this can significantly delay estate administration.

Historically, setting up a charity was relatively straightforward, leading to the creation of many charities. However, many of these charities are now largely dormant, holding only modest amounts of funds. As of 29 August 2025, there are 170,914 registered charities in the UK with 53,673 of these charities in receipt of income of <£5,000 (2).  Charity trustees might consider winding up or consolidating these dormant charities into a DAF, which requires significantly lower administrative effort.

Control vs compliance
At first glance, charitable foundations appear to offer donors greater influence over their giving than a DAF. Many assume that anyone can serve as a charity trustee and that a private charity staffed entirely by family members is sufficient. In practice, while this is not a legal requirement, the Charity Commission often insists on having independent trustees. For corporate foundations, most trustees cannot be company directors or employees. Independence and the ability to demonstrate that trustees act in the charity’s best interests, rather than family or business interests, is crucial. By contrast, there are no such restrictions on who can hold a DAF account or give instructions regarding it.

Private charity trustees may also be willing to take on a higher degree of risk than DAFs, for instance, making donations outside the UK. Some DAFs, however, have blanket restrictions on certain regions. Foundations can offer more flexibility, allowing trustees to make nuanced decisions based on circumstances and opportunities, although they must still perform appropriate due diligence – a key focus area for the Charity Commission.

Finally, donors often assume that investment decisions can only be influenced if they have a private foundation. Many DAFs can work with a donor’s preferred investment advisors and allow some input on investment strategy. Account holders often also receive regular investment statements and other key financial data.

Cost considerations
Setting up a charity used to be relatively inexpensive; however, it is now rare that creating a private foundation is more cost-effective than establishing a DAF. Organisations such as Philanthropy Impact have produced comparisons of costs and charges across a large range of DAF providers, and it is relatively easy to access data regarding minimum account balances and associated fees.  Considering all aspects of the charity creation and registration process, it becomes evident that opting for a foundation is increasingly less likely to be the cheaper option.

DAF providers have a range of pricing models and broadly speaking, the more substantial the donations, the more competitive the pricing becomes. While the ongoing platform costs may seem an unnecessary expense, the difference in regulatory responsibilities between private foundations and DAFs may help to make those costs more palatable. Private foundations are subject to rigorous compliance requirements, including annual filings to the Charity Commission, adherence to specific governance standards, and detailed reporting obligations. These regulations can impose considerable administrative burdens on the charity trustees. 

In contrast, DAFs offer a more streamlined approach, with the sponsoring organisation handling most of the regulatory compliance and reporting duties. For busy donors, the relief from administrative responsibilities often outweighs the ongoing fees.

Tax efficiency
Broadly speaking, UK DAFs and UK foundations provide the same tax benefits to donors. 
The key difference lies in the timing for obtaining those reliefs. DAFs can be established and activated much more quickly than charitable foundations, which is advantageous if making donations within a specific tax year is crucial. This accelerated setup process for DAFs ensures that donors can promptly achieve their desired tax benefits, unlike the lengthier establishment process for private foundations, which may delay potential tax advantages.

Anonymity and reputation
Privacy is often a key concern for donors. DAFs allow contributors to remain anonymous, keeping personal details and donation amounts confidential. By contrast, the names of charity trustees and charity accounts are publicly available on the Charity Commission website, which might not be desirable for those seeking privacy. 

Reputation is another consideration. Private foundations can be vulnerable to scandals involving trustees, founders, or beneficiaries, potentially harming the foundation’s standing. DAFs, managing many accounts, rarely see a single incident affect the organisation’s overall reputation. Their distributed structure provides greater resilience against isolated issues.

Summary
Both DAFs and charitable foundations have merits, depending on a donor’s goals and preferred level of involvement. Understanding the legal, tax, and operational implications is key to choosing.

Footnotes

1,  NPT UK ‘UK Donor-Advised Fund Report’, released 2024.
 2, Charities by income band

The authors

Katya Vagner
Partner at Fladgate LLP

Katya Vagner is a solicitor and partner at Fladgate LLP. She specialises in UK and offshore private client and charity legal and tax matters and advising on complex cross-border issues. Katya advises clients across the globe on issues such as: estate and succession planning, setting up and advising on structures, incapacity planning, administration of trusts and estates, philanthropic strategies and a range of legal and tax issues. Her clients include fiduciaries, charities, high net worth individuals and their family offices. Katya has a particular passion in helping clients implement philanthropic initiatives, including advising on the structuring of UK and cross-border charitable giving and governance matters. 

Bethany Brand
Associate at Fladgate LLP

Bethany is an associate in the Private Client and Tax team at Fladgate LLP. She acts for both UK based and international clients, advising high net worth individuals, families and trustees on a broad range of estate planning and taxation matters. Bethany also advises clients on Charity law and philanthropy matters, including assisting charity trustees on constitutional and governance issues.

Zevi Wulwick
Associate at Fladgate LLP

Zevi is an associate in the Private Client and Tax team at Fladgate LLP. He advises HNW and UHNW clients on a range of matters including UK and international tax, succession and estate planning.