Can UK charities use grants to cover core costs?

Can UK charities use grant funding to cover core costs?

Yes. UK charities can use awards to pay these costs when the conditions allow. For charities asking about grant funding core costs, the answer depends on the award terms. These essential running costs include rent, utilities, insurance, systems and salaries.

Some funders offer unrestricted funding, which you can spend across your charitable purposes. Others offer core funding for named running costs, or project funding that allows a fair share of overheads within a restricted grant.

Budget nearly finished? Still wondering where management time and the heating bill belong? Start with the real cost of delivery, then separate what this funder will pay from what needs another source.

Key takeaways

• Core costs can be grant-funded where the award permits them, either directly or through an eligible project contribution.
• Calculate overheads from actual expenditure and a fair allocation, and check that the percentage you use covers them.
• Separate the full cost, eligible costs and requested grant, with an approved plan to cover any shortfall using unrestricted income.
• Choose funders that fit, explain your decisions clearly and allow enough time for assessment and payment.

What core funding covers

Core costs keep your organisation operating safely and reliably. They include staff salaries, finance, leadership, governance, administration, rent, equipment, utilities and insurance.

Website hosting, shared software and IT support can belong here too. The practical question is whether a cost supports the whole organisation or one particular activity.

Unrestricted and restricted awards

A grant for running costs may or may not be unrestricted, so check the terms.

An award with spending conditions is restricted funding. For example, a grant for your finance manager’s salary supports a running cost, but you must spend it as agreed.

Unrestricted funding gives trustees discretion over spending within the charity’s purposes. It can support running costs, delivery or another legitimate organisational need.

It’s the award conditions that set any restriction, whatever words the application uses.

Project funding and capital funding

Project funding pays for specified work, such as an advice service or community programme. It may include eligible support costs.

Capital funding usually pays for assets or major improvements, such as equipment, a vehicle or refurbishment.

A laptop purchase and its annual software subscription may sit in different budget categories. Maintenance and replacement also need funding beyond the purchase date.

Why funders often prefer projects

A defined project gives a funder a clear decision: named beneficiaries, planned activities, a delivery period and measurable outcomes.

It also helps grantmakers explain how an award supports their own charitable purposes.

Many grantmakers exclude core costs or prefer direct delivery. That creates the familiar “doughnut funding” problem: activity around the outside is funded, whilst the organisation’s centre has a financial hole.

You win the workshops. The workshops need payroll, safeguarding oversight and somewhere warm enough to hold them.

Funding only the visible activity leaves someone else carrying those costs.

Build a proportionate contribution to overheads into every project budget, then check whether the grant can cover it. Even when the requested contribution is zero, the full cost must remain visible internally.

Be careful about inventing another project because it appears fundable. More activity can increase the pressure on an already underfunded organisation.

Calculate the full cost and build your budget

This means securing the direct costs of delivery plus a fair share of organisational support costs.

NCVO’s costing guidance explains that project income needs to cover support costs as well as direct expenditure.

Start with expenditure, then allocate fairly

Build direct costs using delivery hours, salary rates, employer costs, materials, travel, venues and evaluation.

Next, identify shared costs. These might include finance, management, rent, insurance and systems.

Choose an allocation method that reflects actual use of shared overheads. Staff time may suit management support. Floor space and occupancy may better explain premises costs.

Harpur Trust’s April 2025 guidance gives a staff-time example: a project using 25% of chargeable staff time receives 25% of relevant support costs.

Applying that share to a £2,000 support-cost pool produces a £500 project contribution. The remaining £1,500 still belongs elsewhere in the organisation’s funding plan.

The calculation must match your own costs and usage, so work it out each time.

Use percentages as a first check

Adding 10% or 20% to a project budget can be a quick affordability check, but you still need to work out the real support costs.

A funder’s percentage cap tells you the most they’ll pay. Your own costs may well be higher.

If your calculation produces a higher figure, record the gap. Don’t reduce the underlying cost because the application form offers less room.

Our calculation guidance explains how to keep full costs, eligible costs and the grant request separate.

Build a grant budget that explains itself

Your budget and written answers should tell the same story. Show how the grant request fits the full budget to support full cost recovery.

If you promise supervision, reporting and evaluation, give those tasks time and money. “Existing staff will absorb this” needs someone to decide whose workload it comes out of.

Use this short budget checklist:

• Link each substantial cost to an activity, responsibility or delivery requirement.
• Include salary hours, rates and employer costs, so the staffing total is easy to follow.
• Show how you calculate shared overheads and avoid charging the same expenditure twice.
• Separate confirmed income and match funding from pending applications and proposed in-kind contributions.
• Identify who has approved any remaining shortfall and how it will be funded.

Digital and technology costs need the same treatment. A project-only licence may be a direct cost; shared software may need an allocation.

Include hosting, support, upgrades and maintenance where eligible. Buying a system without funding its upkeep creates another bill after the celebration.

Our guidance on building a UK grant budget helps connect the figures with the delivery commitments.

Making the budget look cheaper

Taking management, finance or safeguarding time out of the budget leaves the work still to be done.

It transfers the pressure to colleagues, reserves or another service, and you’re back to the doughnut problem.

The award email arrives, everyone exhales, and delivery starts with a gap.

Show the cost honestly. Explain value for money through proportionate resources, sensible assumptions and credible outcomes.

A realistic application gives grantmakers a clearer view of the commitment they’re approving.

Overstating what is secured

A positive conversation or a sponsor’s interest can feel promising. Until it’s agreed in writing, treat it as pending.

Keep confirmed, pending and planned funding distinct throughout the application. Confirm that any match funding meets the relevant conditions.

Also avoid double counting. Two awards may contribute to one project where both permit it, but they cannot both pay the same expenditure.

The same discipline applies to assets: don’t claim a funded purchase price and depreciation for that same cost.

These are understandable deadline-pressure errors. They still need resolving before submission.

Where to find core funding

Among trusts and foundations, the strongest prospect is a funder whose priorities match your work and whose terms support the costs you need. Core funding can cover recurring costs, while capital funding pays for assets.

Grantmakers are more likely to support work that fits their priorities, so fit matters more than a generous headline amount.

Find prospects without creating another full-time job

A funding search needs boundaries, especially when applications sit alongside your actual job.

The Charity Excellence Funding Finder is a free directory. My Funding Central is another search tool for charities and voluntary organisations.

Use directories to build a shortlist based on your legal structure, location, income, charitable work and required cost type.

The term “small charities” often refers to organisations with annual income up to £1 million. There’s no universal UK-wide threshold, and eligibility limits vary between funders.

Record why each prospect fits before investing time in an application. A short list of suitable funders is more useful than a spreadsheet full of names.

Recent awards can show whether a funder supports ongoing services, core costs or standalone projects. Its latest strategy also matters.

An ineligible application still takes an evening to write. Protect that evening where you can.

Funders that offer core support

Esmée Fairbairn Foundation

Esmée Fairbairn Foundation offers unrestricted funding, core, project and delegated grants for charitable work in the UK.

Its funding priorities concern improving the natural world, creating a fairer future and supporting creative, confident communities. Your work needs to fit its strategy as well as needing running costs covered.

Its general grant guidance sets a £30,000 minimum award and a £100,000 minimum annual turnover.

That makes it a substantial prospect for eligible organisations looking for longer-term support.

Greggs Foundation

The Greggs Foundation Community Action Fund offers up to £20,000 a year for up to three years.

Eligible core contributions include rent and salaries for managers or administrators supporting organisations tackling local needs.

The fund is closed to applications in October 2026, so put it in your forward funding plan for when it reopens.

Older descriptions refer to a two-year maximum. The current programme has a three-year maximum.

The current Lloyds Bank Foundation referral-based pilot provides organisational development support without grant income. That support has value, and it needs to stay out of your income figures for core costs.

When project grants can contribute to running costs

A project grant can cover eligible organisational costs where its rules allow a fair contribution.

These examples show how project funding differs from flexible core funding, whatever the award amount.

National Lottery Awards for All England

National Lottery Awards for All England offers £300 to £20,000 for community projects lasting up to two years.

Eligible organisational running costs can form part of its project costs, including an appropriate share of rent, utilities, broadband and insurance.

That makes it useful for community activity with genuine support costs, although the money is still restricted to the project.

The programme’s decision period is 16 weeks. Build that time into your plan before committing to delivery dates.

Morrisons Foundation

The Morrisons Foundation distinguishes between general grants and its separate Connecting Communities programme.

General grants offer up to £10,000 for eligible capital expenditure or direct project delivery. Organisational running costs sit outside it.

Connecting Communities offers up to £20,000 in capital funding for fully funded projects.

Neither route is unrestricted core funding. Equipment or premises improvements may solve a genuine need, and you’ll still need another source for the wages, insurance and utilities around them.

Make a clear case to grantmakers

A funder needs confidence in your judgement as well as your arithmetic.

Explain what the money allows your organisation to do reliably. Management time supports supervision and safe decisions. Finance support keeps payroll, reporting and spending controls working.

Make those connections clear without pretending every administrative task produces a separate beneficiary outcome.

IVAR’s 2021 unrestricted funding report draws on 12 trusts and foundations. It examines why and how they give flexible awards, with trust central to the relationship.

Help that trust develop. Make annual accounts, safeguarding policies, trustee information and contact details easy to find on your website. Explain significant deficits, reserves and funding concentrations plainly.

You can also describe how decisions are made and how progress is reviewed.

Unrestricted funding still needs a clear plan. The flexibility is in how you spend it, and you still need to account for every decision.

Assessors shouldn’t have to search three documents to understand who is responsible for the money.

Cover the gap and plan the timing

If running costs are excluded, don’t rename them to squeeze them into the form.

Separate genuine direct delivery costs from shared costs. Then decide whether another income source can cover the difference.

Unrestricted income might come through cake sales, sponsored challenges, individual donations, corporate giving or community fundraising. A Charity of the Year partnership can also support fundraising and awareness.

Merchandise and paid training may contribute earned income, but calculate the net return. Stock, preparation, delivery and administration all cost something.

A busy fundraiser can still leave very little surplus once the costs come out.

Trustees may approve a contribution from unrestricted reserves where that’s affordable and consistent with the reserves policy.

Set out the amount, funding source and consequences before accepting the award. A planned subsidy can support your mission. A shortfall nobody planned for makes delivery harder.

Our guide to grant sustainability planning covers continuation costs, long-term sustainability and the difference between promised income and usable funds.

Plan the timing as carefully as the application

Grant funding approval and receipt of funds are separate milestones.

Map decision dates, award conditions and payment dates against payroll, rent and supplier commitments. Track cost recovery gaps alongside these dates. Some grants pay upfront; others pay in stages or reimburse expenditure.

Annual insurance or software bills may arrive in one month. Spreading them evenly across a spreadsheet won’t change the payment date.

For multi-year grants, phase recruitment, delivery and evaluation properly. Include documented assumptions about pay changes and renewals where permitted.

There is no universal success rate for core funding. A consultancy’s wider win rate can’t tell you the odds for one charitable trust’s programme.

Build time for finance approval and a final review. Submission anxiety is familiar enough without discovering that the figures and narrative disagree at 10pm.

At Bidsmithery™, our grant application review and support tests the case, evidence and commitments against the funder’s requirements. Your organisation retains responsibility for financial approval.

Frequently asked questions

Protect the organisation behind the project

Include core costs in an honest account of delivery. Calculate them properly, choose suitable funders and make any remaining commitment visible before accepting an award.

If you’d like another pair of experienced eyes, book a fit check call. We can talk through where support would reduce the pressure and strengthen the application.

An external red review is a practical way to protect your energy, confidence and headspace before you press submit.