Changes to UK Charity Financial Thresholds
The UK government has recently confirmed a series of significant changes to the financial reporting thresholds that apply to charities in England and Wales.
The updated thresholds will affect audit requirements, independent examinations, and the preparation of accrual accounts, and will be particularly relevant for small to medium-sized charities that have seen income growth in recent years.
New thresholds
The most anticipated update is the increase in the statutory audit threshold. The gross annual income threshold for a statutory audit will rise by 50%, increasing from £1 million to £1.5 million.
Alongside the income test, the asset threshold for a mandatory audit — where income exceeds £500,000 (previously £250,000) — will also increase. This asset threshold will rise from £3.26 million to £5 million.
In addition to these headline changes, several other financial reporting thresholds are being updated. A full summary of the revised requirements is set out below. The changes are expected to come into force from 1 October 2026.
| Requirement to have an independent examination | Income > £40,000 |
| Requirement to have a qualified independent examiner | Income > £500,000 |
| Requirement to prepare accrual accounts | Income > £500,000 |
| Requirement to have an audit (Income) | Income > £1,500,000 |
| Requirement to have an audit (Assets) | Assets > £5,000,000 if income is over £500,000 |
| Requirements to prepare group accounts | Income > £1,500,000 |
| Requirement to have an audit of group accounts | Income > £1,500,000 |
It is worth noting that some financial thresholds remain unchanged, including the charity registration threshold and annual return thresholds.
Why do the changes matter?
For many charities — particularly smaller and mid-sized organisations — the existing legal thresholds for audits, independent examinations and financial reporting have increasingly failed to keep pace with economic conditions. Inflation since the last update in 2015 has resulted in a growing number of charities being subject to more onerous compliance requirements, often involving significant time, administrative burden and professional costs.
The revised thresholds are designed to create a more proportionate regulatory framework, reducing unnecessary compliance for charities whose size and risk profile may not justify a full statutory audit. In practice, this may allow trustees to redirect time and resources towards charitable activities while still maintaining appropriate levels of financial transparency and accountability.
So what next?
Although the changes will not take effect until October 2026, charities and their advisers are encouraged to plan ahead. This includes reviewing current reporting arrangements, considering whether audit or independent examination requirements may change, and briefing trustees so they understand the future regulatory position.
The legislation underpinning these changes is expected to be laid before Parliament in 2026.
How we can help
We have a dedicated team of charity and not-for-profit specialists who can advise on the practical impact of these changes and help you plan for the transition. Whether you need support reviewing your reporting requirements, briefing trustees, or understanding your options under the new thresholds, we are here to help.
