---
title: "What is the difference between restricted and unrestricted…"
description: "Restricted funds are donations given for a specific purpose and cannot lawfully be spent on anything else."
source: https://www.charitycompare.org.uk/answers/restricted-vs-unrestricted-funds
retrieved: 2026-08-18T01:26:14.727Z
license: "Charity data © Crown copyright, Open Government Licence v3.0"
---

Charity finances

# What is the difference between restricted and unrestricted funds?

**In short:** Restricted funds are donations given for a specific purpose and cannot lawfully be spent on anything else. Unrestricted funds can be used for any of the charity's purposes, including core costs and salaries. Reserves figures normally refer to free reserves — unrestricted money not already tied up in buildings or equipment.

Data from [CharityCompare editorial](https://register-of-charities.charitycommission.gov.uk/), last updated 12 August 2026.

**Restricted funds** are given for a stated purpose — an appeal for a building, a grant for one project — and trustees cannot lawfully spend them on anything else, even to pay wages in a crisis.

**Unrestricted funds** can be spent on any of the charity’s purposes, including core costs, salaries and overheads.

**Endowment** is capital that must be retained, where often only the investment income may be spent.

Why it matters to donors: a charity can look wealthy on the balance sheet and still be unable to pay its staff, because the money is restricted. That is why reserves are normally quoted as **free reserves** — unrestricted funds not already tied up in buildings and equipment. See [charity reserves explained](https://www.charitycompare.org.uk/guides/charity-reserves-explained).

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