- What Is the Charity Audit Threshold in England and Wales?
- When Does a Charity Need an Audit, Even Below the Threshold?
- Charity Audit vs Independent Examination — What’s the Difference?
- Who Can Carry Out a Charity Audit or Independent Examination?
- The 2026 Charity Audit Threshold Changes — What’s Changing and When
- What Should Trustees Do Before the 2026 Threshold Change?
- FAQs: Frequently Asked Questions
- Conclusion
In England and Wales, a charity must currently undergo a statutory audit if its gross annual income exceeds £1 million, or if its income exceeds £250,000 and its gross assets exceed £3.26 million. These figures rise from 30 September 2026: charities with financial years ending on or after that date will only need a full audit if gross income exceeds £1.5 million, or income exceeds £500,000 and gross assets exceed £5 million. According to their financing requirements or governing document, smaller charities could nevertheless require an independent audit or investigation.
The Charity audit threshold UK guidelines determine whether an independent examination or a statutory audit of a charity’s finances is required. The existing situation, potential changes in 2026, and the reasons trustees should examine their charity’s revenue, assets, legal structure, and governing document prior to the year-end deadline are all explained in this blog.
What Is the Charity Audit Threshold in England and Wales?
The financial threshold that establishes whether a charity in England and Wales is required to undergo a statutory audit of its annual accounts is known as the Charity Audit Threshold UK. A charity typically requires an audit for financial years ending before September 30, 2026, if its gross annual income exceeds £1 million or if its income exceeds £250,000 and its gross assets surpass £3.26 million.
The thresholds rise for financial years that expire on or after September 30, 2026. When gross income surpasses £1.5 million or when income exceeds £500,000 and gross assets exceed £5 million, a statutory audit will be necessary.
Even charities that fall below the audit criteria could require an independent examination. This is typically necessary when gross income reaches £25,000 prior to September 30, 2026; after that date, the threshold rises to £40,000. Even in cases where the statutory requirements are not fulfilled, an audit may be mandated by a charity’s governing document, funder, or regulator. If your charity is approaching this threshold and you want to understand what the process actually involves, our guide to statutory audit services covers what to expect.
The threshold for preparing full accruals accounts, rather than simpler receipts and payments accounts, is also doubling from £250,000 to £500,000 income, aligning with the lowest income tier under the new Charities SORP 2026, which applies to financial periods starting on or after 1 January 2026
When Does a Charity Need an Audit, Even Below the Threshold?
Even if a charity is below the Standard Charity Audit Threshold UK, it may still require a complete statutory audit in England and Wales. This may occur when an audit is mandated by the charity’s governing instrument, trustees elect one on their own initiative, a significant donor makes it a grant requirement, or the Charity Commission exercises its authority to mandate one under certain circumstances.
Some of the situations that can trigger an audit for charities:
- The governing document requires it: Examine the CIO foundation/association constitution, articles of association, trust deed, or charity’s charter. Certain documents mandate an annual audit regardless of asset levels or income. Unless the document is explicitly amended, where revision is permissible, this condition remains in place.
- A funder or donor requires it: Audited accounts may be required as a condition of funding by grant-making organisations, public-sector funders, or significant contributors. This is especially prevalent when grants are large, restricted funds are significant, or the funder requires more confidence over the use of charitable money.
- Trustees decide an audit is appropriate: Even if the charity is legally qualified for an independent audit, trustees may choose to designate a registered auditor. In cases where the charity has complicated operations, substantial restricted funds, property, trading activities, or rapid expansion, they may do so to bolster governance, enhance financial transparency, help future fundraising, or offer assurance.
- The Charity Commission requires an audit: In exceptional cases, the Commission can require external scrutiny. This may be relevant where it has regulatory concerns about a charity’s administration, financial controls, accounts, or compliance.
- Company-law requirements apply: A charitable company must satisfy both charity law and company law. Under the Companies Act 2006, a company qualifies for audit exemption on company law grounds if it meets at least two of three tests: annual turnover of £15 million or less, a balance sheet total of £7.5 million or less, and an average of 50 or fewer employees, for financial years starting on or after 6 April 2025 (GOV.UK, audit exemptions for private limited companies). A charitable company that qualifies as small under company law can still be pulled into a statutory audit if it exceeds the separate charity law thresholds above, so trustees need to check both tests, not just one.
Charity Audit vs Independent Examination — What’s the Difference?
Both an independent examination and audit for charities are external evaluations of a charity’s yearly financial statements, but an audit offers a higher degree of assurance and is more detailed. For charities that fall short of the statutory audit level, an independent assessment is a more constrained and typically less expensive audit.
| Area | Charity Audit | Independent examination |
| Purpose | Provides official confirmation that the accounts accurately depict the charity’s financial situation and have been produced in accordance with applicable legal and accounting regulations. | Identifies issues that need to be brought to the trustees’ notice by looking for particular issues in the accounts, records, and supporting documentation. |
| Level of work | To support their official opinion, the auditor tests the evidence, takes risks into account, examines internal controls as necessary, and conducts audit procedures. | The examiner does not perform the complete audit work required to produce a true-and-fair opinion, but they do check accounting records and accounts. |
| Report issued | An audit report that includes any necessary reporting by exception along with the auditor’s opinion. | A report or statement by an independent examiner that is typically based on negative assurance, which means the examiner reports issues that have come to their knowledge. |
| Who can carry it out? | A person or organisation that is registered with an accredited supervisory body and qualified to serve as a statutory auditor. | An autonomous individual possessing the requisite skills and real-world experience. There may be additional criteria for professional qualifications for larger charities or nonprofits creating accruals accounts. |
Who Can Carry Out a Charity Audit or Independent Examination?
- Qualified finance professionals: An individual with appropriate accounting knowledge and expertise, such as an accountant or finance professional, can take an independent exam.
- Experience with charity accounts: The examiner should be familiar with the applicable Charity Commission legislation as well as charity accounting requirements.
- Trustees and internal staff: Due to independence requirements, trustees, staff, or individuals with close ties to the charity are typically unable to conduct an unbiased evaluation.
- Requirements depend on charity size: Depending on things like income, assets, and regulatory obligations, a charity may require an audit or an independent investigation.
- Independent individuals: The charity’s management or financial decision-making should not involve the examiner or auditor, who must be impartial.
If you want to know more about audit firms you can check our guide to the top 10 audit firms in the UK.
The 2026 Charity Audit Threshold Changes — What’s Changing and When
For charities in England and Wales whose financial years end on or after September 30, 2026, the Charity Audit Threshold UK is being modified. Some charities that presently require a statutory audit or independent investigation may instead be eligible for a less thorough type of external scrutiny since the new regulations raise a number of revenue and asset restrictions.
The government estimates that raising the audit threshold alone will remove around 2,000 charities from the mandatory audit regime, and that the full package of threshold changes will save the sector approximately £47 million a year in professional fees and administrative costs
| Requirement | Current threshold | New threshold from 30 September 2026 |
| Independent examination required | Gross income over £25,000 | Gross income over £40,000 |
| Professional independent examiner required | Gross income over £250,000 | Gross income over £500,000 |
| Statutory audit — income test | Gross income over £1 million | Gross income over £1.5 million |
| Statutory audit — income-and-assets test | Gross income over £250,000 and gross assets over £3.26 million | Gross income over £ 500,000 and gross assets over £ 5 million. |
| Group accounts preparation | Gross income over £1 million | Gross income over £1.5 million |
The charity’s financial year-end, not the day trustees approve the accounts or file the annual report, is when the updated thresholds are applicable. For instance, a charity whose year ends on August 31, 2026, is still subject to the current standards, whereas a charity whose year ends on September 30, 2026, or later, uses the new restrictions.
What Should Trustees Do Before the 2026 Threshold Change?
Trustees should examine their charity’s estimated income, gross assets, accounting method, and external scrutiny needs prior to the implementation of the 2026 Charity Audit Threshold UK amendments. Trustees must prepare for both adjustments rather than treating them as a single event since the new Charities SORP applies to financial periods starting on or after January 1, 2026, and the new thresholds apply to accounting periods ending on or after September 30, 2026.
Trustee checklist for accounting for charities
- Confirm the charity’s financial year-end: This establishes the applicability of the updated Charity Audit Threshold UK regulations. Charities with a year-end of August 31, 2026, utilise the old thresholds; those with a year-end of September 30, 2026, or later, use the new restrictions.
- Forecast gross income and gross assets: Before the end of the year, trustees should evaluate anticipated revenue and assets, such as property, cash, gifts, grants, legacies, trade profits, and investment income. The charity audit thresholds will typically increase to income exceeding £1.5 million or income exceeding £500,000 plus gross assets exceeding £5 million starting on September 30, 2026.
- Decide the appropriate level of external scrutiny: The threshold for external scrutiny increases from £25,000 to £40,000. An independent evaluation may be available to charities with incomes over £40,000 but under the statutory audit level; however, once income surpasses £500,000, the examiner must possess professional qualifications.
- Prepare for the Charities SORP 2026: Financial periods beginning on or after January 1, 2026, are impacted by the updated SORP. Trustees should promptly request that changes to accounting policies, disclosures, reporting procedures, budgeting, and record-keeping be evaluated by their accountant or finance staff.
- Avoid common audit pitfalls: Whichever level of scrutiny applies, most delays and qualified opinions come down to a small set of recurring, avoidable issues. Our guide to why UK businesses fail audits covers the most common ones and how to prepare for them.
FAQs: Frequently Asked Questions
What is the charity audit threshold?
Right now, a charity in England and Wales typically needs a statutory audit if its gross annual income exceeds £1 million, or if its income exceeds £250,000 and its gross assets exceed £3.26 million. From 30 September 2026, those figures rise to £1.5 million income, or £500,000 income with gross assets over £5 million. Depending on their situation and the regulations in place, charities below these limits may typically choose to have an independent examination instead.
Do all charities need an audit?
No, not every nonprofit needs an audit. The charity’s revenue, assets, and legal structure are some of the variables that determine the requirement. While larger charities that meet specific requirements must have their accounts audited by a licensed auditor, smaller organisations could merely require an independent assessment.
What happens if our income goes over the threshold for one year only?
A charity may need to have its accounts audited for that reporting period if its revenue surpasses the audit threshold for just one year. Since the requirement is evaluated yearly, the charity may be qualified to retake an independent evaluation if income drops below the threshold in subsequent years.
When do the new charity audit thresholds take effect?
The new charity audit threshold UK is applicable to accounting years that expire on or after September 30, 2026. The audit income level is expected to rise from £1 million to £1.5 million as a result of the modifications, and the conditions for independent examinations will also be updated.
How much does a charity audit cost?
A charity’s size, revenue, complexity, accounting systems, and the amount of work involved all affect how much an audit will cost. While larger or more complicated organisations may have to pay more costs, smaller charities might only have to spend a few thousand pounds. Reducing audit costs can be achieved by keeping sound financial controls and preparing correct documents.
Conclusion
A charity audit is crucial for guaranteeing accountability, financial transparency, and adherence to charitable laws. Trustees can fulfill their legal obligations and uphold stakeholder confidence by being aware of whether your organisation needs an audit or an independent assessment. Charities may guarantee their accounts are produced accurately and streamline the audit process by engaging with a trained independent professional, maintaining robust financial controls, and keeping accurate records.
Not sure which threshold applies to your charity?
Our team at Cox Hinkins can review your charity’s income, assets, and governing document to confirm whether you need a statutory audit or an independent examination under both the current and 2026 rules, and help you prepare before your year end.
