Charities throughout England and Wales should review their accounting systems and financial reporting obligations as new rules take effect during 2026. For financial years ending on or after 30 September 2026, changes to audit thresholds, independent examinations and permitted accounting methods could affect how some charitable organisations prepare and review their accounts.

Trustees, finance teams and charity administrators should assess their organisation's income, assets and reporting responsibilities before the end of the financial year. Checking the latest UK charity audit thresholds can help determine which rules apply and whether existing accounting procedures need to be updated.

Although the revised thresholds may mean fewer charities need a statutory audit, organisations must still consider their legal structure, governing documents and any additional conditions set by funders.

What Is Involved in a Charity Audit?

A charity audit is an independent review of an organisation's financial statements performed by a suitably registered auditor.

During the audit, the auditor examines the financial information and expresses an opinion on whether the accounts have been prepared under the relevant reporting framework and provide a true and fair view.

A statutory audit generally involves a greater level of scrutiny than an independent examination. Depending on its income, assets, legal structure and other obligations, an eligible smaller charity may be able to arrange an independent examination instead.

Trustees should establish the appropriate level of external scrutiny for their organisation rather than assume the same rules apply to every charity.

Charity Audit Thresholds Before 30 September 2026

For financial years ending before 30 September 2026, a charity will generally require an audit under the existing rules if:

• Its gross income exceeds £1 million, or

• Its gross income exceeds £250,000 and its gross assets exceed £3.26 million.

These limits have been used to determine whether a charity falls within the statutory audit requirements.

Charities with financial years ending on or after 30 September 2026 should assess their position against the revised thresholds. The financial year-end date is therefore an important consideration when deciding which rules apply.

What Changes From 30 September 2026?

The 2026 reforms raise the financial limits used to determine whether a charity generally needs 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.

Under these revised limits, some charities that previously needed an audit may no longer fall within the statutory audit category.

However, trustees should review both income and asset values where applicable. They should also check whether grant conditions, the charity's governing document or other arrangements require an audit regardless of the statutory thresholds.

Being below the relevant financial limits does not necessarily mean that a charity is free from all audit requirements.

Revised Requirements for Independent Examinations

An independent examination is an alternative form of external scrutiny available to eligible charities that do not require a statutory audit. It involves an independent review of the accounts, but it 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 under the updated framework include:

• Charities with gross income of £40,000 or less will generally not require an independent examination or audit unless another obligation applies.

• Charities with gross income above £40,000 and up to £1.5 million can generally opt for an independent examination or an audit, subject to the applicable rules.

• Where gross income exceeds £500,000, the independent examiner must meet the relevant qualification criteria and belong to an appropriate professional body.

Income is not the only factor trustees should consider. The charity's legal form, governing document and funding agreements may influence which type of external scrutiny is necessary.

Changes to Receipts and Payments Accounting

The 2026 changes also raise the income limit for certain charities that 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 accounting method, provided they meet the relevant conditions.

Previously, the threshold was £250,000.

Charities with gross income above £500,000 will generally need to prepare accruals accounts. The correct accounting basis depends on the charity's circumstances and the rules that apply to its legal structure.

The revised threshold is intended to make financial reporting more proportionate for eligible organisations. Before changing their procedures, trustees should confirm that the charity meets all the conditions for using receipts and payments accounting.

Understanding SORP 2026

Charities that prepare accruals accounts should also review the applicable Charities Statement of Recommended Practice, commonly referred to 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 examine their current accounting policies and reporting processes to identify any changes that may be needed.

Preparing in advance can help organisations incorporate the relevant requirements into their normal accounting routines and reduce the need for substantial adjustments close to the reporting deadline.

Do Charities Still Need to Prepare Annual Accounts?

Yes. Higher audit thresholds do not remove the general responsibility of charities to maintain appropriate financial records and prepare annual accounts.

The specific requirements depend on several factors, including:

• The charity's legal structure.

• Its gross income.

• The value of its assets.

• The provisions of its governing document.

• The accounting standards that apply.

• Relevant Charity Commission requirements.

Registered charities continue to have annual reporting responsibilities. The 2026 reforms change the level of external scrutiny or the accounting methods available to certain organisations; they do not eliminate the wider need for financial accountability.

Trustees should ensure that financial records remain complete and that annual accounts comply with the requirements relevant to their organisation.

Additional Reporting Obligations for Charitable Companies

Charitable companies need to consider both company law and charity law when managing their accounting and reporting duties.

Unlike some unincorporated charities, charitable companies must prepare accruals accounts and comply with relevant Companies House filing obligations as well as their charity reporting requirements.

For this reason, a change to the charity audit threshold does not automatically remove a charitable company's separate responsibilities under company law.

Reviewing Companies House filing deadlines can help charitable companies plan their accounts preparation and submit the required documents on time.

Trustees should check each applicable legal framework to ensure that separate filing and reporting duties are not overlooked.

Can a Charity Arrange an Audit Voluntarily?

Yes. A charity may choose to have its accounts audited even when its income and assets fall below the statutory threshold.

Trustees may decide to arrange a voluntary audit for several reasons, such as:

• Requirements specified by funders.

• Conditions included in the governing document.

• The charity's internal governance policies.

• Expectations from donors and other stakeholders.

• Concerns about internal controls.

• Risk management considerations.

For instance, a grant agreement may require audited accounts regardless of whether the charity meets the statutory income and asset limits.

Depending on the circumstances, an audit may also provide additional reassurance to donors, funders and other stakeholders.

Before deciding between an audit and an independent examination, trustees should review all relevant obligations and consider the appropriate level of financial scrutiny for their organisation.

Keeping Charity Financial Records Accurate

Reliable financial records are essential because a charity's income and asset values can influence its accounting and audit requirements.

Charities should maintain clear, up-to-date records of:

• Donations and fundraising income.

• Grants and other funding received.

• Day-to-day operating costs.

• Payroll and employment expenditure.

• Gift Aid claims.

• Restricted and unrestricted funds.

• Investments.

• Assets and liabilities.

Maintaining these records throughout the year makes it easier to prepare annual accounts and identify whether the organisation is approaching a relevant financial threshold.

Regular reconciliations and financial reviews can also help trustees identify inconsistencies, monitor expenditure and address accounting issues before they become more significant.

When Should a Charity Consider Changing Its Auditor?

A charity may need to appoint a different auditor if an existing appointment comes to an end, its reporting requirements change or trustees decide to review the professional services they receive.

Before changing auditors, trustees should examine the governing document, relevant regulations and any formal rules governing the appointment or removal of an auditor.

Organisations considering a change can review the changing UK auditors process to understand the key stages involved.

Careful planning can help preserve continuity in financial reporting and reduce the risk of missing important deadlines during the transition.

Corporation Tax Issues Charities Should Consider

Charities may be entitled to particular tax reliefs and exemptions. However, this does not automatically mean that all their activities are outside the scope of Corporation Tax.

Potential tax considerations may arise from:

• Trading activities.

• Subsidiary companies.

• Activities that are not charitable.

• Investment income.

• Other income that may be taxable.

The correct tax treatment depends on the charity's activities and individual circumstances.

Using corporation tax services UK can help charities and associated entities review their tax responsibilities, maintain suitable records and understand relevant reporting requirements.

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

How Coxhinkins Can Help Charities

Managing charity accounts can become more complicated when an organisation receives funding from multiple sources, holds substantial assets, operates subsidiaries or has additional reporting conditions to meet.

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

Support may cover areas such as:

• Preparing annual financial statements.

• Maintaining reliable accounting records.

• Reviewing financial information.

• Preparing for independent examinations.

• Assisting with audit preparation.

• Clarifying financial reporting obligations.

• Updating accounting procedures to reflect regulatory changes.

Working with an appropriate professional adviser can help trustees understand the rules 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 review the effect of the revised thresholds before the end of their financial year, rather than waiting until annual reporting deadlines are close.

A practical preparation process 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 requirements.

5. Review any audit conditions imposed by funders.

6. Confirm the appropriate accounting method.

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

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

Taking these steps early gives trustees time to clarify their obligations, adjust accounting procedures and arrange any professional services that may be required.

Final Thoughts

The charity audit threshold changes for financial years ending on or after 30 September 2026 represent a significant update 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 review the updated independent examination and receipts and payments accounting limits, together with the relevant requirements of SORP 2026.

Keeping accurate financial records and reviewing reporting arrangements well before the year-end can help charities prepare for the new rules and continue to meet their obligations.

For charities seeking professional assistance with accounts, financial reporting and audit-related responsibilities, Coxhinkins can provide accounting support suited to their needs.