Charities operating across England and Wales should review their financial reporting arrangements as regulatory changes come into effect during 2026. For financial years ending on or after 30 September 2026, revised audit thresholds, independent examination rules, and accounting options may change the reporting responsibilities of some charitable organisations.

Trustees, financial managers, and charity administrators should assess their organisation's income, asset values, and legal obligations ahead of the financial year-end. Reviewing the latest UK charity audit thresholds can help charities establish which requirements apply and identify whether their current accounting procedures need to be amended.

Although the higher 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 assessment of an organisation's financial statements carried out by an appropriately registered auditor.

The auditor examines the financial records and reports on whether the accounts 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 scrutiny than an independent examination. Depending on its income, assets, legal structure, and other applicable obligations, a smaller eligible charity may be able to use an independent examination instead.

Trustees should identify the correct form of external scrutiny for their organisation rather than assume that every charity follows the same requirements.

Charity Audit Thresholds Before 30 September 2026

For financial years ending before 30 September 2026, a charity will generally be subject to statutory audit requirements if either of the following conditions applies:

• Its gross income is above £1 million.

• Its gross income is above £250,000 and its gross assets are above £3.26 million.

These thresholds have traditionally helped determine whether a charity must arrange a statutory audit.

Charities whose financial years end on or after 30 September 2026 should assess their circumstances using the updated limits. The date on which the financial year ends is therefore important when establishing which requirements apply.

What Changes From 30 September 2026?

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

For financial years ending on or after 30 September 2026, a statutory audit will generally be required where either of the following applies:

• Gross income exceeds £1.5 million.

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

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

Trustees should assess both gross income and asset values where relevant. They should also examine grant agreements, governing documents, and other arrangements that might 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 have 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 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 choose between an independent examination and an audit, subject to the relevant rules.

• Where gross income exceeds £500,000, the independent examiner must satisfy the applicable qualification requirements and belong to an appropriate professional body.

Income alone does not determine the correct form of scrutiny. Trustees should also consider the charity's legal structure, governing document, and funding agreements before making a decision.

Changes to Receipts and Payments Accounting

The 2026 reforms also increase the income limit under which certain charities can use receipts and payments accounting.

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 method, provided they meet the applicable conditions.

Previously, the relevant income limit was £250,000.

Charities with gross income above £500,000 will generally be required to prepare accruals accounts. The appropriate accounting method depends on the organisation's circumstances, legal form, and the rules governing its financial reporting.

The increased threshold is intended to make reporting arrangements more proportionate for eligible charities. However, trustees should confirm that all relevant conditions are satisfied before changing their accounting practices.

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 accounting and financial reporting for charities under the relevant financial reporting framework.

Trustees and finance teams should review their existing accounting policies, reporting procedures, and financial systems to determine whether any updates are necessary.

Planning ahead can help organisations incorporate the applicable requirements into their usual accounting processes and avoid having to make extensive changes close to the reporting deadline.

Do Charities Still Need to Prepare Annual Accounts?

Yes. An increase in audit thresholds does not remove the general responsibility to maintain appropriate financial records and prepare annual accounts.

The precise requirements depend on several factors, including:

• The charity's legal structure.

• Its gross income.

• The value of its assets.

• The requirements contained in its governing document.

• The accounting standards applicable to the organisation.

• Relevant Charity Commission requirements.

Registered charities continue to have annual reporting responsibilities. The 2026 changes affect the level of external scrutiny required or the accounting methods available to certain organisations; they do not eliminate the broader need for financial transparency and accountability.

Trustees should ensure that their records remain accurate and complete and that their annual accounts comply with all relevant requirements.

Additional Reporting Duties for Charitable Companies

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

Unlike some unincorporated charities, charitable companies must prepare accruals accounts. They must also comply with relevant Companies House filing requirements alongside their charity-specific reporting responsibilities.

Consequently, a change in the 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 necessary documents within the required timeframe.

Trustees should check the rules under each applicable legal framework to ensure that no separate filing or reporting responsibility is overlooked.

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 thresholds.

Trustees may consider a voluntary audit for several reasons, including:

• Conditions imposed by grant providers.

• Requirements in the charity's governing document.

• Internal governance policies.

• Expectations of donors and other stakeholders.

• Concerns about financial controls.

• Risk management needs.

For example, a funding agreement may specifically require audited accounts, even when the charity falls below the statutory income and asset limits.

Depending on the organisation's circumstances, a voluntary audit may also offer additional reassurance to funders, donors, and other interested parties.

Before choosing between an audit and an independent examination, trustees should review all applicable obligations and determine the appropriate level of external scrutiny.

Maintaining Accurate Charity Financial Records

Accurate financial information is essential because a charity's income and assets can influence its accounting method and external scrutiny requirements.

Charities should maintain organised, up-to-date 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 throughout the year makes annual accounts preparation easier and helps trustees identify whether the organisation is approaching a relevant financial threshold.

Regular bank reconciliations and financial reviews can also reveal inconsistencies, support expenditure monitoring, and help resolve accounting problems before they become more serious.

When Should a Charity Consider Changing Its Auditor?

A charity may need to appoint a new auditor when an existing appointment ends, its reporting obligations change, or trustees decide to review their current professional arrangements.

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

Organisations exploring their options 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 minimise the risk of missing important deadlines.

Corporation Tax Considerations for Charities

Charities may qualify for certain tax reliefs and exemptions, but this does not mean that every activity they undertake is automatically outside the scope of Corporation Tax.

Potential tax considerations may arise from:

• Trading activities.

• Subsidiary companies.

• Non-charitable activities.

• Investment income.

• Other 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 associated entities assess their tax responsibilities, maintain suitable financial records, and understand relevant reporting obligations.

Trustees should consider tax compliance alongside accounting and audit responsibilities as part of the organisation's wider financial management.

How Coxhinkins Can Support Charities

Managing charity accounts can become increasingly demanding when an organisation receives funding from several sources, holds significant assets, operates subsidiary companies, or has additional reporting requirements.

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

Assistance 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 to reflect regulatory changes.

Working with an appropriate professional adviser can help trustees understand the requirements that apply to their charity and make informed decisions about accounting, financial management, and governance.

How to Prepare for the 2026 Charity Audit Changes

Charities should assess the impact of the revised thresholds before their financial year ends, rather than waiting until annual reporting deadlines approach.

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 any audit requirements imposed by funders.

6. Establish which accounting method is appropriate.

7. Determine whether SORP 2026 applies to the reporting period.

8. Discuss any proposed changes with the charity's accountant, auditor, or independent examiner.

Taking these steps early gives trustees more time to clarify their responsibilities, update financial procedures, and arrange any professional services that may be needed.

Final Thoughts

The changes to charity audit thresholds for financial years ending on or after 30 September 2026 represent an important update for charitable organisations in 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 limits for independent examinations and receipts and payments accounting, alongside the relevant requirements of SORP 2026.

Maintaining accurate financial records and reviewing reporting arrangements well ahead of the year-end can help charities prepare for the updated rules and continue meeting their legal obligations.

For organisations seeking professional help with accounts, financial reporting, and audit-related responsibilities, Coxhinkins can provide accounting support tailored to their requirements.