Donation-based crowdfunding
People give money to a cause or community project through an online platform and expect nothing back. It costs nothing but fees and effort, but it only works for projects people want to support.
- No security
How it works
You set up a campaign on an online fundraising platform, explain what the money is for and set a target. Supporters give money and get nothing in return, or only a small thank-you, such as a mention.
- Who uses it: charities, community groups, social enterprises and community projects such as a village shop, a sports club or a local green space. People are much less willing to donate to a business that makes a profit for its owners.
- Regulation: donation-based crowdfunding is not regulated by the FCA. For charitable fundraising in England, Wales and Northern Ireland, the Fundraising Regulator sets standards in its Code of Fundraising Practice. Platforms should show clearly how their fees work and how much of each donation reaches the cause.
- VAT: if supporters get nothing back, or only a symbolic thank-you, HMRC treats the money as a donation, and no VAT is due on it.
If supporters get a reward with real value, such as a product or tickets, that is reward-based crowdfunding, a separate route.
Upsides and downsides
Upsides
- Nothing to repay, no shares and no rewards to deliver
- No VAT on true donations
- Builds a group of local supporters and volunteers
Downsides
- Only works for causes people want to give to
- Amounts are usually small
- Campaigns take a lot of time and promotion
Risks
- Missing your target, and on all-or-nothing platforms raising nothing
- Damage to your reputation if the money is not spent as promised
What it costs
- How it is priced
- Nothing to repay. Platform and payment fees are taken from donations
- Costs that are easy to miss
- Platform fees, payment processing fees, or optional "tips" asked of donors
- Time and money spent promoting the campaign
Depends on your target and how many supporters you can reach. Most campaigns are small.
Does it fit?
Could fit when
- You are raising for a community, charitable or social project
- You have a community of supporters who would back the cause
Unlikely to fit when
- You need large sums
- You are a business raising for your own profit, which people rarely donate to
Who can use it
- Business types: Sole trader, Partnership, Private limited company, LLP, Community interest company, Co-operative or community benefit society, Charity
- Open to businesses with no sales yet
- The platform must accept your project
- Most donors expect a charitable, community or social purpose
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all crowdfunding and community finance
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0 of 4 ticked
- A clear cause and target
- Supporters to launch to
- Platform fees checked
Regulation and protections
Donation-based crowdfunding is not regulated by the FCA. Charitable fundraising in England, Wales and Northern Ireland is overseen by the Fundraising Regulator, an independent body without statutory powers.
Types of provider: Online fundraising and donation platforms; Community crowdfunding platforms.
Also consider
Sources
- FCA: Crowdfunding · checked 7 October 2026
- Fundraising Regulator: Code of Fundraising Practice, online fundraising platforms · checked 7 October 2026
- Fundraising Regulator: About us · checked 7 October 2026
- HMRC VAT Finance Manual VATFIN5550: crowdfunding · checked 7 October 2026