Financial reporting thresholds to change in England and Wales

A further consultation in relation to financial reporting thresholds in England and Wales has also concluded, including those that determine whether a charity requires an audit. Audit thresholds for private sector bodies have increased substantially. However, despite a period of sustained inflation, reporting thresholds for charities have remained unchanged since the introduction of the Charities Act (2011). In response to the consultation, audit thresholds will rise, reducing the regulatory burden for smaller charities. The changes require legislation but are expected to come into force from 30 September 2026 onwards, taking effect for periods beginning on or after that date. The previous £1m threshold will now rise to £1.5m.

While the changes may offer relief to smaller organisations, they also raise questions about maintaining assurance and accountability. Whilst doubtlessly any option to reduce costs both directly (audit fees) and indirectly (resources deployed to support the audit process) will be welcomed by the sector, stakeholders and potential donors may take a different view. Given the level of sensitivity around the use of donated funds, particularly those being provided to smaller charities with weaker control systems or those operating in riskier geographic jurisdictions, both existing stakeholders and prospective donors alike may wish to see audited accounts before continuing to commit funds and to gain assurance over the use of previous donations. Audits can also add significant value to charities, particularly those without access to skilled professionals internally – commissioning a full external audit may well highlight internal control issues or other insights that may be missed by an Independent Examination (the alternative to an external audit for charities falling below the threshold). Therefore, charities should monitor developments closely and consider how changes might affect both their reporting obligations and strategic goals. For those on the cusp of the current thresholds, strategic planning may be needed to adapt to new requirements and ensure continued transparency.

In addition to changes to audit thresholds, proposals are also in place to review other key financial and regulatory limits. Registration thresholds are recommended to remain unchanged: charities with income under £5,000 are not required to register, and excepted charities must register if their income exceeds £100,000. Raising these thresholds was ruled out due to the benefits of registration and the administrative burden of system changes.

For annual return filing, the consultation aligns thresholds with inflation. Currently, charities must file increasingly detailed returns as income rises: over £25,000 (basic financial data), over £100,000 (governance and financial details), and over £500,000 (additional disclosures). These thresholds may be adjusted to reduce burdens on smaller charities while maintaining transparency.

Regarding independent examination, the current threshold requiring an audit is £1 million income or £250,000 income with £3.26 million in assets. The consultation considers raising these limits to reflect inflation, potentially reducing the number of charities needing full audits. This aims to ease compliance costs for smaller charities while ensuring sufficient oversight.

Overall, the proposals seek to balance regulatory efficiency with public trust, ensuring that financial scrutiny remains appropriate to charity size and resources.

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If you have any questions, then please feel free to get in touch with Michaela Johns on 023 8046 1256 or email Michaela Johns.