Changes to how charities in England and Wales are classified and regulated by size

Significant changes are coming to how charities in England and Wales are classified and regulated by size. For accounting periods ending on or after 30 September 2026, new financial thresholds will take effect on audit requirements, reporting obligations and how charities prepare their accounts.

These changes should make charity regulation more proportionate, cost-effective and aligned with inflation.

Thresholds

Current thresholds versus those coming in September 2026:

Requirement	Current Threshold	New Threshold (from Sept 2026)
Independent examination required	£25,000 income	£40,000 income
Qualified independent examiner required	£250,000 income	£500,000 income
Receipts & payments accounts allowed (non-company charities)	Up to £250,000	Up to £500,000
Statutory audit (income test)	Over £1,000,000	Over £1,500,000
Statutory audit (assets + income)	£3.26m assets & £250k income	£5m assets & £500k income
Group audit threshold	£1,000,000	£1,500,000

(GOV.UK)

Small charities

The increase in the audit threshold from £1 million to £1.5 million is one of the most impactful changes. (ICAEW)

This means many charities that previously required a full audit will now fall below the threshold and be eligible for an Independent Examination instead. This is expected to reduce both costs and administrative complexity for smaller charities.

Accounting methods for charities

Non-company charities will now be able to use receipts and payments accounts up to £500,000 income, doubling the previous limit. (GOV.UK)

This simpler form of accounting allows accounts to be prepared purely on a cash in and out basis.

Changes to independent examination requirements

The threshold for requiring an independent examination will increase to £40,000, which will be helpful for the smallest charities.

In addition, only charities with an income above £500,000 will need a professionally qualified examiner

Asset Thresholds

For charities with significant assets but lower income, the conditions that trigger the need for an audit is also changing:

• Asset threshold rises from £3.26 million to £5 million
• Income condition rises from £250,000 to £500,000

(ICAEW)

This allows asset-rich but operationally small charities to have an Independent Examination.

Further changes

For accounting periods starting on or after 1 January 2026 the updated charities Statement of Recommended Practice (SORP) 2026 will come into effect. This will incorporate the changes to FRS 102 and will introduce changes such as a new 3 tier reporting framework.

These reforms represent the biggest significant shift in UK charity financial thresholds in over a decade. By increasing size thresholds across the board, the government is aiming to create a more balanced and proportionate regulatory environment. Hopefully, this will allow charities in England and Wales to save costs and have greater flexibility.

If you are involved with a charity that needs an audit or independent examination, we can help. Contact your local Perrys branch today.