Charities operating across England and Wales should review their accounting arrangements and financial reporting responsibilities ahead of the regulatory changes taking effect in 2026. For financial years ending on or after 30 September 2026, updated rules covering audit thresholds, independent examinations and accounting methods may affect how certain charitable organisations prepare and scrutinise their financial statements.

Trustees, finance professionals and charity administrators should assess their organisation’s income, assets and reporting obligations before the financial year closes. Reviewing the latest UK charity audit thresholds can help charities establish which requirements apply and identify whether existing accounting procedures need to change.

While the revised limits may reduce the number of charities required to undergo a statutory audit, organisations must still take account of their legal structure, governing documents and any additional conditions imposed by funders.

What Does a Charity Audit Involve?

A charity audit is an independent assessment of an organisation’s financial statements carried out by an appropriately registered auditor.

The auditor reviews the financial records and accounts before providing an opinion on whether they have been prepared in accordance with the relevant reporting framework and present a true and fair view of the charity’s financial position.

A statutory audit usually involves more extensive examination than an independent examination. Depending on its income, assets, legal structure and other responsibilities, a smaller eligible charity may be able to use an independent examination instead.

Trustees should determine the appropriate level of external scrutiny for their organisation rather than assume that identical requirements apply to every charity.

Charity Audit Thresholds Before 30 September 2026

Under the existing rules, charities with financial years ending before 30 September 2026 will generally need a statutory audit if either of the following conditions applies:

• Gross income is more than £1 million.
• Gross income is more than £250,000 and gross assets exceed £3.26 million.

These financial limits help establish whether an organisation falls within the statutory audit requirements.

Charities whose financial years end on or after 30 September 2026 should instead assess their circumstances against the revised thresholds. Consequently, the year-end date is an important factor when determining which requirements apply.

What Will Change From 30 September 2026?

The 2026 reforms increase the financial thresholds used to establish whether charities generally need a statutory audit.

For financial years ending on or after 30 September 2026, a statutory audit will generally be necessary when:

• Gross income exceeds £1.5 million.
• Gross income exceeds £500,000 and gross assets exceed £5 million.

As a result, some charities that previously fell within the statutory audit requirements may no longer meet the revised criteria.

Nevertheless, trustees should assess both income and asset values where relevant. They must also consider whether the charity’s governing document, funding arrangements or other obligations require an audit independently of the statutory thresholds.

Falling below the applicable financial limits does not automatically remove every possible audit obligation.

Updated Rules for Independent Examinations

An independent examination provides an alternative form of external scrutiny for eligible charities that are not required to undergo a statutory audit. It involves an independent review of the accounts but does not offer the same level of assurance as a full audit.

For financial years ending on or after 30 September 2026, the updated framework generally provides for the following:

• Charities with gross income of £40,000 or less will not normally 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 choose between an independent examination and an audit, subject to the applicable conditions.
• Where gross income exceeds £500,000, the independent examiner must satisfy the relevant qualification requirements and belong to an appropriate professional body.

Income alone does not determine the correct approach. A charity’s legal structure, governing document and funding agreements may also affect the level of external scrutiny required.

Changes to Receipts and Payments Accounting

The 2026 reforms also increase the income threshold for certain charities permitted to 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 this accounting method if they satisfy the relevant conditions.

Previously, the limit was £250,000.

Charities with gross income above £500,000 will generally be required to prepare accruals accounts. However, the appropriate accounting basis depends on the organisation’s circumstances, legal form and applicable regulations.

The higher limit is intended to make reporting arrangements more proportionate for qualifying charities. Before changing their accounting procedures, trustees should confirm that their organisation meets all the conditions for using receipts and payments accounting.

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 within the relevant financial reporting framework.

Trustees and finance teams should review their existing accounting policies and reporting processes to determine whether adjustments are necessary.

Early preparation allows organisations to incorporate relevant requirements into their regular accounting procedures and reduces the likelihood of extensive changes being needed shortly before accounts are due.

Do Charities Still Have to Prepare Annual Accounts?

Yes. An increase in audit thresholds does not remove a charity’s general responsibility to keep appropriate financial records and prepare annual accounts.

The precise requirements depend on several considerations, including:

• The charity’s legal structure.
• Its gross income.
• The value of its assets.
• The terms of its governing document.
• The accounting standards that apply.
• Relevant Charity Commission requirements.

Registered charities continue to have annual reporting responsibilities. The 2026 reforms alter the level of external scrutiny or the accounting options available to certain organisations; they do not remove the wider obligation to maintain financial accountability.

Trustees should make sure records are complete, accurate and sufficient to support annual accounts prepared in accordance with the rules applicable to their charity.

Additional Reporting Responsibilities for Charitable Companies

Charitable companies must consider both company law and charity law when meeting their accounting and financial reporting obligations.

Unlike certain unincorporated charities, charitable companies must prepare accruals accounts and comply with the relevant Companies House filing requirements alongside their charity reporting responsibilities.

Therefore, a change in the statutory charity audit threshold does not automatically remove a charitable company’s separate obligations under company law.

Reviewing Companies House filing deadlines can help charitable companies organise their accounts preparation and submit the required documents within the applicable time limits.

Trustees should check each relevant legal framework to ensure that separate reporting and filing duties are properly addressed.

Can a Charity Choose to Have a Voluntary Audit?

Yes. A charity can arrange an audit voluntarily even if its income and assets are below the statutory audit thresholds.

Trustees may choose this option for several reasons, including:

• Requirements imposed by grant providers or other funders.
• Conditions set out in the governing document.
• Internal governance policies.
• Expectations of donors and stakeholders.
• Concerns about financial controls.
• Risk management requirements.

For example, a grant agreement might require audited accounts even when the charity’s income and assets do not meet the statutory audit limits.

Depending on the circumstances, a voluntary audit may also provide additional confidence to donors, funders and other interested parties.

Before choosing between an audit and an independent examination, trustees should review all applicable obligations and decide which level of financial scrutiny best meets the organisation’s needs.

Maintaining Accurate Charity Financial Records

Accurate financial information is important because a charity’s income and asset values can affect its accounting arrangements and audit obligations.

Charities should maintain clear, current records covering:

• Donations and fundraising receipts.
• Grants and other funding.
• Routine operating expenditure.
• Payroll and employment costs.
• Gift Aid claims.
• Restricted and unrestricted funds.
• Investments.
• Assets and liabilities.

Keeping these records up to date throughout the year makes preparing annual accounts easier and helps identify when an organisation is approaching a relevant financial threshold.

Routine reconciliations and financial reviews can also help trustees spot discrepancies, monitor spending and resolve accounting issues before they become more serious.

When Should a Charity Consider Changing Its Auditor?

A charity might need to appoint a new auditor when an existing appointment ends, its reporting requirements change or trustees decide to reassess the professional support they receive.

Before making a change, trustees should review the governing document, applicable regulations and any formal procedures covering the appointment or removal of an auditor.

Charities planning a transition can review the changing UK auditors process to understand the main steps involved.

Planning the change carefully can help maintain continuity in financial reporting and minimise the risk of missed deadlines during the transition.

Corporation Tax Considerations for Charities

Charities may qualify for particular tax reliefs and exemptions, but this does not automatically mean that every activity is exempt from Corporation Tax.

Potential tax obligations may arise from:

• Trading activities.
• Subsidiary companies.
• Non-charitable activities.
• Investment income.
• Other forms of potentially taxable income.

The appropriate tax treatment depends on the charity’s activities and individual circumstances.

Using corporation tax services UK can help charities and related entities review their tax obligations, maintain appropriate financial records and understand the reporting requirements that apply to them.

Trustees should consider tax compliance alongside audit and accounting matters as part of their wider financial management responsibilities.

How Coxhinkins Supports Charities

Managing charity accounts can become more demanding when an organisation receives funding from several sources, holds significant assets, operates subsidiary companies or must comply with additional reporting conditions.

Coxhinkins offers accounting and audit-related assistance to help organisations manage their financial reporting responsibilities.

Support may include:

• Preparing annual financial statements.
• Maintaining accurate accounting records.
• Reviewing financial information.
• Supporting independent examination preparation.
• Helping charities prepare for audits.
• Clarifying financial reporting obligations.
• Updating accounting processes to reflect regulatory changes.

Working with a suitably qualified professional adviser can help trustees understand the requirements relevant to their organisation and make informed decisions about accounting, governance and financial management.

How to Prepare for the 2026 Charity Audit Changes

Charities should evaluate how the revised thresholds affect their organisation well before the financial year-end, rather than waiting until reporting deadlines are approaching.

A practical preparation checklist includes:

1. Estimate the charity’s expected gross income.
2. Review the value of its relevant assets.
3. Confirm the organisation’s legal structure.
4. Check the governing document for additional obligations.
5. Review audit conditions set by funders.
6. Establish which accounting method the charity can use.
7. Determine whether SORP 2026 applies to the reporting period.
8. Discuss proposed changes with the charity’s accountant, auditor or independent examiner.

Taking these steps early gives trustees sufficient time to confirm their obligations, update accounting procedures and arrange any necessary professional support.

Final Thoughts

The charity audit threshold reforms applying to financial years ending on or after 30 September 2026 introduce important changes for charitable organisations across England and Wales.

Under the revised framework, a statutory 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 assess the revised independent examination requirements, the higher receipts and payments accounting threshold and the relevant provisions of SORP 2026.

Maintaining accurate financial records and reviewing reporting arrangements well before the year-end can help charities prepare for the changes and continue to fulfil their responsibilities.

Charities looking for professional assistance with accounts, financial reporting and audit-related matters can contact Coxhinkins for accounting support tailored to their organisation’s needs.