Why small charities need more than recognition

By Nayyara Tabassum (NCVO) and Suzanne Perry (Lloyds Bank Foundation for England and Wales)

---

Between us, we’ve seen a wide range of funding applications from small charities, and no two are ever the same.

We’ve reviewed bids for specialist equipment for children with cancer, schemes turning restaurant waste into meals, bridge repairs to reconnect older residents with their village hall, and research to track domestic abuse after local industry closures. These applications speak volumes.

Small charities are imaginative, rooted in place and attuned to the day-to-day realities people face. Their work meets immediate needs with deep understanding, often doing what no other organisation is positioned to do.

Small Charity Week is a timely point to reflect on the critical role these organisations play and what they need to survive. Drawing on new analysis from NCVO’s 2025 Civil Society Almanac, our analysis commissioned by Lloyds Bank Foundation highlights both the scale and the strain facing these organisations.

Small charities make up the majority of the sector but hold a fraction of the income

Over 80% of UK charities operate on less than £100,000 a year, yet they account for just 4% of the sector’s income. Despite this, they are the front line for everything from food security to mental health support, from community cohesion to environmental action.

Our analysis of small charities shows that income is fragmented and inconsistent. Micro-charities (under £10k income) rely largely on voluntary income, while those closer to the £100k threshold show greater diversification, including government and earned income. However, even at the upper end, reserves are limited and many lack the infrastructure to manage demand sustainably.

Small charities’ work is community-embedded and responsive

Nearly two-thirds of small charities work exclusively at the local level. Their proximity allows them to understand and respond to specific community needs in ways that larger national organisations often cannot. These charities, such as those run by and for the communities they serve, are often first responders to local crises, trusted by those they serve, and embedded in relationships built over time.

And when small charities operate beyond a local level, including those working nationally or internationally, they remain rooted in communities. Many are set up by people with direct lived experience or close ties to the places they support.

Whether working in the UK or overseas, their approach is shaped by trust, long-term relationships and a deep understanding of local context.

Their financial resilience is thin but their impact is immense

Many small charities operate within tight margins, low fundraising capacity, and minimal reserves, and yet they continue to deliver life-changing support. Volunteer contributions remain especially high among the smallest charities. What’s clear is that support for infrastructure, be it governance, digital, fundraising, is as vital as funding service delivery itself.

For funders like Lloyds Bank Foundation, these insights reinforce the case for more targeted, flexible funding and capacity-building. Segmenting funding support by income bands, for example, recognising that a £15k charity has different needs from a £95k one, can lead to smarter, more equitable funding decisions.

These findings should inform how we fund and support small charities. Their stories and data show clearly what’s needed: long-term, flexible funding, tailored to their size and circumstances.

If we want to back the communities that are most overlooked or underserved, we need to back the organisations rooted in them – and that means putting small charities at the centre of funding and policy decisions.