Capital vs revenue funding: a guide for UK charities

The National Lottery Community Fund's Sustainable Steps Wales – Egin Grants guidance gives useful examples: equipment purchases and building refurbishment are capital costs; project salaries, volunteer expenses, transport, translation and evaluation are revenue costs. These are examples from that programme, not a universal eligibility list.

Use those headings for a first draft, then check the definitions in the application you are actually completing. Do not decide solely by price or by whether you pay once. Describe what each purchase does and ask the funder about anything unclear, such as a package combining equipment, installation, training and ongoing support.

Keep the grant budget classification separate from decisions about how to record a purchase in your accounts. This guide helps you prepare a funding request; ask the person responsible for your accounts to check the accounting treatment.

Some programmes cover both. Egin Grants explicitly includes capital and revenue costs. Other programmes limit the capital element: the Community Fund's Community Action guidance allows small capital costs but excludes projects primarily concerned with capital work. Read the balance-of-costs rules as well as the list of permitted purchases.

A funder accepting equipment costs does not automatically make a building-led project suitable. Start by describing the main purpose in one sentence: for example, “equip a shared workshop” or “deliver weekly repair sessions”. Then check whether the funder supports that purpose and the proposed mix of spending. The programmes cited here illustrate how rules differ; they are not a list of grants currently open to your organisation.

Imagine a charity wants to buy equipment for a repair workshop and run ten sessions. The following figures are fictional planning assumptions, not supplier quotes or a statement that any programme will fund them.

• Equipment purchase: £3,000. Proposed capital cost, with a list of items and an explanation of who will use them.
• Session facilitator: £1,500. Proposed revenue cost: ten sessions at £150 each.
• Room hire: £600. Proposed revenue cost: ten sessions at £60 each.
• Volunteer travel: £200. Proposed revenue cost, supported by an estimate of journeys and expenses.

The proposed split is £3,000 capital and £2,300 revenue, making £5,300 in total. If a funder accepts only the equipment purchase, the charity still needs a credible way to pay the £2,300 delivery costs. Buying the equipment alone does not deliver the ten sessions.

In your own budget, add a column for each cost's proposed funding source and mark contributions as confirmed or pending. If you plan to combine funders, explain which costs each would cover and check their conditions. Our match funding guide explains how to present contributions without confusing the total project cost with the amount requested.

Capital work can come with specific evidence requirements. For land or refurbishment, Egin's published guidance asks for ownership or lease evidence, necessary permissions and three independent builders' quotes; it also specifies lease conditions and landlord permission where applicable. Check your chosen programme's requirements before commissioning work. Do not copy another funder's lease period or quotation rules into your own checklist without checking them.

For an initial conversation with a funder, prepare:

• A description of each asset or improvement and the community benefit it will enable.
• The proposed site, owner and arrangements for access.
• Supplier estimates showing what is included and what is excluded.
• Questions about permissions, insurance, maintenance and any restrictions on later sale or change of use.
• A timetable identifying approvals needed before ordering or starting work.

Treat this as a preparation list, not a claim that every grant requires every item. For spending already made or work already agreed, use our guide to applying after a project has started before including those costs.

Make a second budget for the period after installation or purchase. Ask who will pay for staffing, utilities, servicing, storage, insurance and replacement parts where relevant. Put a named income source or an unresolved funding gap beside each item rather than assuming the purchase grant covers it.

This can affect eligibility. Lewisham's published NCIL guidance for its 2024 round, for example, excluded projects with significant ongoing costs not covered by the bid. That historical rule is a useful reason to check sustainability requirements, not evidence that the round is open now.

If the activity also uses shared office or management time, work out the appropriate share separately. Our full cost recovery guide covers overhead allocation. Avoid counting the same cost both as a direct project expense and as part of overheads.

Read the programme's cost definitions, exclusions and any limit on capital spending. Check ambiguous items with the funder using a short description and an itemised price. Keep its answer with the application, then ensure the narrative, budget totals and delivery timetable describe the same project.

Search OpenGrant with Charity / VCSE and Grant selected to find possible funders. These filters do not distinguish capital from revenue funding or confirm cost eligibility. Open the funder's guidance for that check. For broader funding routes, start with our UK charity grants guide.