Update on charity financial threshold changes in England and Wales

26 January 2026

Last updated: 17 March 2026

Christine Scott
Head of Charities and Reporting, ICAS

Following public consultation, the Department for Culture Media and Sport (DCMS) announced plans to increase the key financial thresholds applying to the preparation and scrutiny of accounts prepared by charities in England and Wales.

The consultation outcome was published by DCMS on 31 October 2025 and this coincided with the publication of the revised Charities Statement of Recommended Practice (Charities SORP 2026) by the Charities SORP-making Body.

The threshold increases, intended to reduce the regulatory burden on charities while retaining an appropriate level of transparency, have been welcomed by the charity sector and the accountancy profession, including us. Our response to the consultation is available here.

DCMS consulted on 21 thresholds in total and decided to retain 11 of these. The consultation outcome provides a table setting out which thresholds are to be retained, and which are to be raised. This article focuses on planned increases in key financial thresholds relating to the preparation and scrutiny of charity accounts under the Charities Act 2011. It also considers the financial threshold changes in the context of other regulatory matters and changes which are or may soon impact on the charity sector, under the following headings:

What are the key changes to financial thresholds impacting on the preparation of accounts?
What are the key changes to financial thresholds impacting on the audit of accounts?
What are the key changes impacting on the independent examination of accounts?
Legislative basis for accounts and audit requirements of charitable companies in England and Wales.
Wider commitments from DCMS.
Expected implementation timetable.
Cross border issues.
ICAS guidance on charity audit exemption in England and Wales.

What are the key changes to financial thresholds impacting on the preparation of accounts?

Accounts preparation requirements under the Charities Act 2011

Under the Charities Act 2011, charities which aren’t companies currently have the option of preparing receipts and payments accounts if their gross income per annum is £250,000 or less. This threshold is set to double to gross income per annum of £500,000 or less.

This means that some non-company charities required to prepare ‘true and fair’ accounts, i.e. accounts prepared under Financial Reporting Standard (FRS) 102 and the Charities SORP 2026, may soon have the option of preparing receipts and payments accounts instead.

However, the charity trustees of such non-company charities currently preparing their accounts under the Charities SORP should consider whether it would be appropriate for their charity to move to preparing receipts and payments accounts. For example:

Do the charity’s founding documents require it to prepare ‘true and fair’ accounts? If so, can the founding documents be amended to change this requirement?
Do the charity’s funders or potential funders prefer the charity to prepare ‘true and fair’ accounts? If so, could discussions with them smooth the way to preparing receipts and payments accounts instead?
Is the charity pursuing new funding in order to grow its services? If so, could it exceed the new receipts and payments accounts threshold in the next few years? If ‘yes’, a move to receipts and payments accounts may not be worthwhile.

Charities preparing group accounts under the Charities Act 2011

For a parent charity, the threshold for preparing group accounts will increase from gross aggregate income of more than £1 million to gross aggregate income of more than £1.5 million.

Charitable companies preparing group accounts

Where the parent charity is a company, the legal basis for the preparation, and audit, of group accounts is more complicated and the charity’s trustees, who are its directors under company law, and their accountancy advisers should consider how charity law and company law interact.

Further information about the legislative basis for accounts and audit requirements of charitable companies in England and Wales is set out below.

What are the key changes to financial thresholds impacting on the external scrutiny of accounts?

Charities receiving an audit under the Charities Act 2011

For a charity registered with the Charity Commission for England and Wales (CCEW) and complying with the Charities Act 2011, the audit threshold is to rise from:

Gross annual income of more than £1 million to gross annual income of more than £1.5 million; or
Gross assets of more than £3.26 million to gross assets of more than £5 million; and gross annual income of more than £250,000 to gross annual income of more than £500,000.

This means that, following the implementation of the planned changes, a charity receiving an audit under the Charities Act 2011 with a gross annual income of more than £1.5 million will require an audit regardless of the gross assets it holds at the balance sheet date.

However, following the implementation of the planned changes, a charity with gross assets of more than £5 million at the balance sheet date will require an audit but only if it also has gross annual income of more than £500,000.

Groups accounts receiving an audit under the Charities Act 2011

For a parent charity registered with the CCEW and complying with the audit requirements of the Charities Act 2011, the audit threshold for group accounts is to rise from:

Gross aggregate income of the group of more than £1 million for the year to gross aggregate income of the group of more than £1.5 million after consolidation adjustments.

Therefore, the audit threshold under the Charities Act 2011 for the individual accounts of a charity aligns with the Act’s threshold for the preparation and audit of group accounts.

Other considerations

In addition, a charity will need an audit if:

It’s required to by the constitution of the charity, any other enactment, or on the instruction of its trustees.
In the case of a charity with a pre-Charities Act 1992 constitution, the constitution contains a requirement for an audit or examination by a professional auditor.

If a charity is a company (including being a parent company), and it doesn’t satisfy the Companies Act 2006 audit exemption requirements, an audit should be undertaken solely under company law. The Charities Act 2011 specifically disapplies charity law audit requirements to charitable companies above the company law audit threshold.

Where a charitable company is a parent charity preparing group accounts, care should be taken to ensure that the audit is conducted under all appropriate legislation.

What are the key changes impacting on the independent examination of accounts?

A charity registered with the CCEW which doesn’t receive an audit requires an independent examination under the Charities Act 2011 unless its gross annual income is below £25,000. Under the DCMS proposals, a charity which doesn’t receive an audit will need an independent examination unless its gross annual income is under £40,000.

Prior to undertaking an independent examination rather than an audit, it’s vital to check that the charity is entitled to audit exemption under all applicable legislation and doesn’t otherwise require an audit e.g. due to a requirement in its founding documents.

Currently a charity with a gross annual income of more than £250,000 receiving an independent examination must have this conducted by a qualified examiner. This threshold will increase to £500,000. A qualified examiner must be a member of one of the bodies specified in charity law which includes us.

However, it’s important to note that we don’t permit members who don’t hold a practising certificate to undertake the independent examination of charities with a gross annual income of more than £500,000. This restriction is currently in place and isn’t linked to the planned financial threshold changes for charities in England and Wales.

Legislative basis for accounts and audit requirements of charitable companies in England and Wales

Our view is that any accounts prepared by a charitable company, either individual or group accounts, which are subject to audit must be audited under all applicable legislation, including the Companies Act 2006.

Also, a charitable company shouldn’t receive an audit under the Charities Act 2011 unless specifically required to do so under that Act, with one exception. It’s custom and practice for auditors to undertake the audit under both the Charities Act 2011 and the Companies Act 2006 where a charitable company is below the audit threshold set out in the Charities Act 2011. This is due to a grey area in the legal requirements whereby the Charities Act 2011 doesn’t make specific provision for the audit of charitable companies below the charity law audit threshold.

Legislative basis for accounts and audit requirements of charitable companies in England and Wales

Size of company	Individual charitable company		Charitable parent company preparing group accounts
	Accounts preparation	Audit	Accounts preparation	Audit
Below Charities Act 2011 audit threshold	Companies Act 2006	Companies Act 2006, although practice is for the audit to be undertaken under the Charities Act 2011 too	Companies Act 2006 and Charities Act 2011	Companies Act 2006 and charities Act 2011
Above the Charities Act 2011 audit threshold but below the Companies Act 2006 audit threshold	Companies Act 2006	Companies Act 2006 and Charities Act 2011	Companies Act 2006 and Charities Act 2011	Companies Act 2006 and charities Act 2011
Above the Companies Act 2006 audit threshold	Companies Act 2006	Companies Act 2006	Companies Act 2006	Companies Act 2006

Wider commitments from DCMS

Among the wider commitments made by DCMS in the consultation outcome, it’s committed to working with the CCEW to develop a standardised form and content for receipts and payments accounts, and on the digitalisation of charity accounts.

DCMS and the CCEW are also expected to review the sufficiency of guidance on independent examination in view of the planned increase in both the independent examination threshold and the threshold for appointing a qualified independent examiner.

This means that charities and their accountancy advisers should look out for changes to the CCEW’s existing Receipts and payment accounts pack (CC16), or the replacement of CC16 with a new product, and for changes to the CCEW’s independent examination guidance:

Reference to the digitalisation of charity accounts by DCMS is significant, as this hints that plans for all charitable companies to file their reports and accounts with Companies House using third party software may be mirrored in future by CCEW filing requirements for all charities, including non-company charities.

Expected implementation timetable

The financial threshold changes will be taken forward via secondary legislation in 2026. In its consultation outcome report, DCMS states that “In order to ensure there is sufficient time for charities to understand and prepare for the impact of the changes, the changes won’t come into effect before 1 October 2026.”

This means that DCMS hasn’t yet indicated which reporting periods the financial threshold increases will apply to.

However, the CCEW stated in an accounting and reporting update published to coincide with the consultation outcome, and the publication of the Charities SORP 2026, that “These changes are expected to come into effect on 30 September 2026 and apply to accounting years that end on or after 30 September 2026.”

This means, typically, that the financial threshold changes could apply to reporting periods beginning on or after 1 October 2025, assuming a reporting period of 12 months.

With the updated edition of FRS 102 and the Charities SORP 2026 being implemented for reporting periods beginning on or after 1 January 2026, the increased financial thresholds may already be applicable depending on the effective date of the awaited secondary legislation.

However, in the absence of definitive information on when the increased financial thresholds will apply, charities should be wary of making any decisions about the preparation and scrutiny of their accounts which rely on the changes applying to accounting periods ending on or after 30 September 2026 until there is legal certainty about the implementation date.

The CCEW intends to update its guidance Charity reporting and accounting: the essentials (CC15) before the changes to the financial thresholds are implemented.

Charities accounting and reporting essentials (CC15d) was first published on 1 November 2016 and last updated on 19 December 2025.

Cross border issues

Cross-border charities i.e. charities based in England and Wales but registered in Scotland with the Office of the Scottish Charity Regulator (OSCR) must continue to comply with the Charities Accounts (Scotland) Regulations 2006, including the accounts preparation and scrutiny thresholds.

Financial thresholds under Scottish charity law are lower and will continue to be lower than financial thresholds under English charity law and the Companies Act 2006.

While fewer financial thresholds apply to charities registered with OSCR, those thresholds remain unchanged with the exception of the charity audit threshold, which has increased for accounting periods beginning on or after 1 January 2026.

The updated gross income criterion of the audit threshold is gross annual income of £1 million or more, a rise from gross annual income of £500,000 or more. There is no change to the assets’ criterion.

Therefore, for accounting periods beginning on or after 1 January 2026, a Scottish charity, including a cross-border charity, will require an audit if:

It has gross income of £1 million or more; or
The aggregate value of its assets (before deduction of liabilities) at the end of the financial year exceeds £3,260,000; or
It’s required to do so by the constitution of the charity, any other enactment, or on the instruction of its trustees (for example, due to a request from a funder).

The increase in the Scottish charity audit threshold coincides with the implementation date for the revised edition of FRS 102 and the Charities SORP 2026.

ICAS guidance on charity audit exemption in England and Wales

Our Guidance on charity audit exemption for ICAS members acting for charities in England and Wales (November 2022) provides an overview of the current audit thresholds relevant to charities, including charitable companies, in England and Wales, covering:

Audit thresholds: Charities receiving an audit under the Charities Act 2011.

Change of legal form and external scrutiny considerations.
ICAS guidance on the audit of charitable companies.
Independent examination.
Cross-border charities: The England and Wales perspective.

It also includes information on the legal basis for the preparation of accounts by charitable companies.

Due to the planned financial threshold changes and other changes impacting on the content of this guidance, this document will be updated once the implementation date for the financial threshold changes has been finalised.

However, for the time being, the guidance provides useful information about how certain financial thresholds are structured and some other matters which may need to be considered in determining whether a charity in England and Wales requires an audit or independent examination or whether no external scrutiny is required.

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