Following a public consultation over the summer, the Department for Culture, Media and Sport (DCMS) issued the government’s response on 31 October. The response confirmed significant changes to charity financial thresholds in England and Wales, due to take effect on or after 1 October 2026. The reforms aim to simplify reporting requirements and reduce administrative burdens, delivering an estimated £47 million in annual savings across the sector. There are also a number of financial thresholds which have remained the same.
Audit Thresholds
The most anticipated update is the increase in the statutory audit threshold. Charities will now require an audit only if their gross annual income exceeds £1.5 million (up from £1 million). The asset threshold, where income is £500k+, will also rise from £3.26 million to £5 million. This inflationary adjustment will remove around 2,000 charities from mandatory audit requirements.
Independent Examination
The income threshold for independent examination will increase from £25,000 to £40,000, benefiting approximately 11,000 smaller charities and saving £7.8 million annually. While this decouples the IE threshold from the £25,000 reporting threshold, the sector widely supports the change.
Strategic Alignment at £500,000
Two major thresholds will jump to £500,000:
- Accruals accounting: Non-company charities will prepare full accruals accounts only above £500k (previously £250k).
- IE qualification requirements: Professional qualifications for examiners will apply only above £500k, reducing costs for around 9,000 charities.
What hasn’t changed?
Significant changes include:
- The gross income registration threshold for new charities remains at £5,000.
- The threshold above which ‘excepted charities’ are required to register cannot be raised above the current £100,000 under current legislation. Excepted charities include some churches, scout and guide groups and student unions.
- The thresholds for annual returns and reports are kept at £10,000 and £25,000.
What This Means
These changes reflect a strong push for simplification and consistency, aligning with the new Charities SORP 2026 tiers. While concerns remain about examiner quality, DCMS has committed to reviewing guidance.
For finance professionals and charity leaders, now is the time to plan ahead. These reforms promise a lighter compliance load and significant cost savings—welcome news for a sector under financial pressure.
If you have any questions please contact Sarah Williams [email protected] or Neil Burton [email protected]
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