Charities across England and Wales need to review their accounting and financial reporting arrangements as new requirements take effect during 2026. For financial years ending on or after 30 September 2026, changes to audit thresholds, independent examinations and accounting methods may affect how some charitable organisations prepare and scrutinise their financial statements.
These updates mean trustees, finance managers and charity administrators should assess their organisation's financial position and reporting responsibilities well in advance. Reviewing the latest UK charity audit thresholds can help charities understand which requirements may apply and determine whether their existing procedures need to change.
Although the revised thresholds may reduce the number of charities that require a statutory audit, organisations must still consider their legal structure, governing documents and any additional conditions imposed by funders.
What Does a Charity Audit Involve?
A charity audit is an independent examination of an organisation's financial statements carried out by an appropriately registered auditor.
The auditor evaluates the financial information and provides an opinion on whether the accounts have been prepared in accordance with the applicable reporting framework and present a true and fair view.
An audit generally involves more extensive scrutiny than an independent examination. Depending on its income, assets, legal structure and other obligations, a smaller charity may be able to use an independent examination instead of a full statutory audit.
Trustees should establish which form of scrutiny applies to their organisation rather than assuming that every charity must follow the same requirements.
Charity Audit Thresholds Before September 2026
For financial years ending before 30 September 2026, the existing rules generally require a charity to undergo an audit when:
Gross income exceeds £1 million, or
Gross income exceeds £250,000 and gross assets exceed £3.26 million.
These thresholds have traditionally helped determine whether a charity falls within the statutory audit requirements.
However, charities with financial years ending on or after 30 September 2026 need to consider the revised limits. The relevant financial year-end is therefore an important factor when assessing which rules apply.
What Changes From 30 September 2026?
The 2026 reforms increase the financial thresholds used to determine whether a charity generally requires a statutory audit.
For financial years ending on or after 30 September 2026, an audit will generally be required where:
Gross income is greater than £1.5 million, or
Gross income is greater than £500,000 and gross assets are greater than £5 million.
These higher limits mean that some charities previously required to have an audit may no longer fall within the statutory audit category under the revised thresholds.
Nevertheless, trustees should assess both income and assets where relevant. They must also check whether their governing documents, grant agreements or other arrangements impose additional audit requirements.
A charity that falls below the statutory threshold may still need an audit for other reasons.
Updated Rules for Independent Examinations
An independent examination provides an alternative form of external financial scrutiny for eligible charities that do not need a statutory audit. It involves an independent review of the accounts but does not provide the same level of assurance as a full audit.
For financial years ending on or after 30 September 2026, the general arrangements described in the updated framework include:
Charities with gross income of £40,000 or less will generally not need an independent examination or audit unless another requirement applies.
Charities with gross income above £40,000 and up to £1.5 million can generally use an independent examination or choose an audit, subject to other applicable requirements.
Where gross income exceeds £500,000, the independent examiner must meet the relevant qualification requirements and belong to an appropriate professional body.
Trustees should not base their decision on income alone. The charity's legal structure, governing document and funding arrangements may affect the type of external scrutiny required.
Changes to Receipts and Payments Accounting
The 2026 reforms also increase the threshold for certain charities that can prepare receipts and payments accounts.
For financial years ending on or after 30 September 2026, eligible unincorporated charities and charitable incorporated organisations (CIOs) with gross income of £500,000 or less can generally use receipts and payments accounting, provided the relevant conditions are met.
The previous threshold was £250,000.
Charities with income above £500,000 will generally need to prepare accruals accounts. The appropriate accounting method depends on the organisation's circumstances and the rules applicable to its legal structure.
The revised limit is intended to make reporting requirements more proportionate for eligible charitable organisations. Trustees should confirm their eligibility before changing their accounting procedures.
Understanding SORP 2026
Charities preparing accruals accounts should also consider the applicable Charities Statement of Recommended Practice, commonly known as the SORP.
SORP 2026 applies to reporting periods beginning on or after 1 January 2026. It provides guidance on charity accounting and financial reporting under the relevant financial reporting framework.
Trustees and finance teams should review their existing accounting policies and reporting procedures to determine whether changes are necessary.
Preparing early can help charities incorporate the relevant requirements into their accounting processes and avoid having to make extensive adjustments close to the reporting deadline.
Do Charities Still Have to Prepare Annual Accounts?
Yes. Changes to audit thresholds do not remove a charity's general responsibility to maintain suitable financial records and prepare annual accounts.
The precise requirements depend on factors such as:
The charity's legal structure.
Gross income.
The value of its assets.
Its governing document.
The applicable accounting standards.
Relevant Charity Commission requirements.
Registered charities continue to have annual reporting responsibilities. The 2026 changes affect the level or type of scrutiny and the accounting methods available to certain organisations, rather than removing the general need for financial accountability.
Trustees should ensure that records remain complete and that accounts are prepared in accordance with the requirements applicable to their charity.
Additional Requirements for Charitable Companies
Charitable companies must consider both company law and charity law when managing their financial reporting responsibilities.
Unlike certain unincorporated charities, charitable companies must prepare accruals accounts and meet relevant Companies House filing requirements alongside their charity reporting obligations.
Consequently, a change in the charity audit threshold does not automatically remove a charitable company's separate company-law responsibilities.
Understanding Companies House filing deadlines can help charitable companies plan their accounts preparation and submit the necessary documents on time.
Trustees should review the organisation's obligations under each applicable framework to avoid overlooking separate filing requirements.
Can Charities Choose to Have an Audit Voluntarily?
Yes. A charity may decide to commission an audit even when it falls below the statutory threshold requiring one.
There are several reasons why trustees may choose this approach, including:
Requirements imposed by funders.
Conditions in the governing document.
The charity's governance policies.
Donor expectations.
Internal control considerations.
Risk management needs.
For example, a grant agreement may require independently audited accounts regardless of whether the charity's income and assets reach the statutory thresholds.
An audit may also provide additional reassurance to stakeholders, depending on the charity's circumstances.
Before deciding whether to arrange an audit or independent examination, trustees should review all applicable obligations and consider the level of scrutiny appropriate for their organisation.
Maintaining Accurate Charity Financial Records
Reliable accounting records are essential because income and asset values can influence the reporting requirements that apply to a charity.
Organisations should maintain clear records covering:
Donations and fundraising receipts.
Grants and other funding.
Operating expenditure.
Payroll and employment costs.
Gift Aid claims.
Restricted and unrestricted funds.
Investments.
Assets and liabilities.
Keeping these records updated throughout the year makes it easier to prepare annual accounts and assess whether the charity is approaching a relevant financial threshold.
Regular reconciliations and financial reviews can also help trustees identify discrepancies, monitor spending and address potential problems before they become more serious.
When Should a Charity Change Its Auditor?
A charity may need to appoint a new auditor because an existing appointment has ended, its reporting requirements have changed or trustees want to review the professional services it receives.
Before making a change, trustees should check the charity's governing document, applicable regulations and any formal requirements relating to auditor appointment and removal.
Charities considering a different adviser can review the changing UK auditors process to understand the main stages involved.
Planning the transition carefully can help maintain continuity in financial reporting and ensure that important deadlines are not overlooked.
Corporation Tax Considerations for Charities
Charities may qualify for specific tax reliefs and exemptions, but this does not automatically mean that every activity undertaken by a charity is outside the scope of Corporation Tax.
Potential tax considerations can arise from:
Trading activities.
Subsidiary companies.
Non-charitable activities.
Investment income.
Other potentially taxable income.
The appropriate treatment depends on the organisation's activities and individual circumstances.
Accessing corporation tax services UK can help charities and related entities review their tax responsibilities, maintain appropriate records and consider relevant reporting obligations.
Trustees should ensure that tax compliance is reviewed alongside accounting and audit arrangements rather than treating these responsibilities as entirely separate matters.
How Coxhinkins Can Support Charities
Charity accounting can become more demanding when an organisation receives funding from several sources, manages significant assets, operates through subsidiaries or has additional reporting conditions.
Coxhinkins offers accounting and audit-related support to help organisations manage their financial reporting responsibilities.
Support may include:
Preparing annual financial statements.
Maintaining accurate accounting records.
Reviewing financial information.
Preparing for independent examinations.
Supporting audit preparation.
Clarifying financial reporting obligations.
Updating accounting procedures in response to regulatory changes.
Working with an appropriate professional adviser can help trustees understand their reporting position and make informed decisions about financial management and governance.
Preparing for the 2026 Charity Audit Changes
Charities should assess the effect of the revised thresholds before their financial year-end rather than waiting until annual reporting deadlines are approaching.
A practical preparation plan can include the following steps:
Estimate the organisation's expected gross income.
Review the value of relevant assets.
Confirm the charity's legal structure.
Check the governing document for additional requirements.
Identify audit conditions imposed by funders.
Confirm which accounting basis is appropriate.
Review whether SORP 2026 applies to the reporting period.
Discuss any proposed changes with the charity's accountant, auditor or independent examiner.
Taking these steps early gives trustees time to clarify their obligations, update accounting procedures and arrange any required professional services.
Final Thoughts
The charity audit threshold changes applying to financial years ending on or after 30 September 2026 represent an important development for charities in England and Wales.
Under the revised framework, an audit will generally be required where gross income exceeds £1.5 million, or where gross income exceeds £500,000 and gross assets exceed £5 million.
Trustees should also consider the updated independent examination and receipts and payments accounting thresholds, alongside the applicable requirements of SORP 2026.
Maintaining accurate financial records and reviewing reporting arrangements well in advance can help charities prepare for the changes and continue meeting their obligations.
For organisations seeking professional assistance with charity accounts, financial reporting and audit-related requirements, Coxhinkins can provide accounting support tailored to their needs.
