Latest updates for charity accounting – what you need to know

Following our previous articles: What’s new in charity accounting: the latest confirmed updates  and New charity accounting rules on the horizon – what it could mean for you,  this article highlights the forthcoming changes.

From 30 September 2026, important changes to charity accounting and reporting rules will come into effect in England and Wales.

The changes update a number of financial thresholds that have remained largely unchanged for many years. The aim is to reflect inflation and reduce unnecessary administration and costs for charities, while maintaining appropriate financial oversight.

For many charities, the changes could mean lower accountancy costs and less administrative work.

When do the new rules apply?

The new thresholds apply to financial years ending on or after 30 September 2026.

This means:

• If your financial year ends before 30 September 2026, you must continue to follow the current rules.
• If your financial year ends on or after 30 September 2026, the new thresholds will apply.

The key date is the end of your financial year, not when you prepare or submit your accounts.

What's changing?

• Several of the key financial thresholds used for charity accounting and reporting are increasing.
• The income threshold for a mandatory statutory audit is rising from £1 million to £1.5 million.
• The asset threshold linked to audit requirements (where a charity's income exceeds £500,000) is increasing from £3.26 million to £5 million.
• For non-company charities, the income threshold for preparing simpler receipts and payments accounts instead of accruals accounts is doubling from £250,000 to £500,000.
• The threshold at which a charity requires an Independent Examination is increasing from £25,000 to £40,000.
• Finally, the income level at which an Independent Examiner must hold a recognised professional qualification is increasing from £250,000 to £500,000.

Higher audit threshold

One of the most significant changes is the increase in the income threshold for a mandatory statutory audit.

Currently, most charities with an annual income of more than £1 million must have their accounts audited.

From financial years ending on or after 30 September 2026, this threshold increases to £1.5 million.

This means that many charities with an annual income between £1 million and £1.5 million may no longer need a statutory audit and may instead be eligible for an Independent Examination, provided they do not meet any other legal requirement for an audit.

More flexibility for smaller charities

The changes also make it easier for some non-company charities to prepare their annual accounts.

Previously, charities with an income above £250,000 were required to prepare accruals accounts.

Under the new rules, eligible non-company charities with an annual income of £500,000 or less can prepare simpler receipts and payments accounts instead, unless their governing document or another legal requirement requires accruals accounts.

Charities with an income above £500,000 will still need to prepare accruals accounts in accordance with the Charities Statement of Recommended Practice (SORP).

Changes to Independent Examinations

The threshold for requiring an Independent Examination is increasing from £25,000 to £40,000.

In addition, the point at which an Independent Examiner must hold a recognised professional qualification is increasing from £250,000 to £500,000.

These changes should make the reporting requirements more proportionate for many smaller charities.

How many charities will benefit?

The Government estimates that around 2,000 charities will no longer require a statutory audit because of the higher audit threshold.

In addition, approximately 11,000 charities will no longer need an Independent Examination as a result of the increase in the relevant income threshold.

What isn't changing?

While several financial thresholds are increasing, some important requirements remain the same.

These include:

• the £5,000 income threshold for registering with the Charity Commission (unless the charity is a charitable incorporated organisation, which must register regardless of income)
• the £10,000 threshold for submitting an Annual Return
• the £25,000 threshold for preparing a Trustees' Annual Report.

What should trustees do now?

If your charity is approaching one of the new thresholds, now is a good time to review your financial reporting arrangements.

Trustees should:

• check when their financial year ends
• consider whether the new rules will apply to their next set of accounts
• discuss the changes with their accountant or Independent Examiner if they are unsure which reporting requirements apply
• ensure their finance systems are appropriate if they will need to prepare accruals accounts.

It's also important to remember that some governing documents, funders or lenders may still require an audit, even where charity law no longer does.

These changes are intended to make financial reporting more proportionate, allowing charities to spend less time and money on administration while maintaining high standards of accountability and transparency.

For full details of the changes and how they may affect your organisation, visit the Government's guidance on changes to charity accounting and reporting here.