Charity audit threshold

The thresholds, and the law that sets them

The charity audit threshold in England and Wales is set by section 144 of the Charities Act 2011, which now reads: an audit is required if “(a) the charity's gross income in that year exceeds £1.5 million, or (b) the charity's gross income in that year exceeds the accounts threshold and at the end of the year the aggregate value of its assets (before deduction of liabilities) exceeds £5 million.” The accounts threshold is the figure in section 133, now £500,000. The audit must be by a person eligible for appointment as a statutory auditor under Part 42 of the Companies Act 2006, or a member of a body specified in regulations.

Below the audit threshold, section 145 applies: if gross income “exceeds £40,000 the accounts of the charity for that year must, at the election of the charity trustees, be – (a) examined by an independent examiner … or (b) audited”. Above £500,000 the examiner must be independent and a member of one of the listed accountancy bodies or “a Fellow of the Association of Charity Independent Examiners.”

The figures were raised by the Charities Acts 1992 and 2011 (Substitution of Sums) Order 2026 (SI 2026/427), made on 17 April 2026 under the 2011 Act’s own powers, in force on 30 September 2026, and extending to England and Wales only. The Charities Act 2022 did not change them. The Commission’s Changes to charity accounting and reporting says the new figures “aim to reduce costs and administrative effort for smaller charities.” Its Threshold changes at a glance, updated 16 September 2026, sets out the before and after:

• No examination or audit required (unless the governing document requires one): income £40,000 or less, previously £25,000 or less.
• Independent examination: income over £40,000, previously over £25,000.
• Professionally qualified independent examiner: income over £500,000, previously over £250,000.
• Audit: income over £1.5 million, previously over £1 million.
• Audit: income over £500,000 and assets over £5 million, previously income over £250,000 and assets over £3.26 million.
• Group accounts prepared and audited: group income over £1.5 million, previously over £1 million.

Two things did not move. The same table keeps the annual return at income over £10,000 and sending the trustees’ annual report and accounts to the Commission at income over £25,000, so a charity between £25,000 and £40,000 no longer needs an examination but must still file its report and accounts. And the receipts and payments option for non-company charities rose from £250,000 to £500,000, which is also the accounts threshold in the audit assets test.

Which year, which figure: the year-end rule

The new thresholds apply by the date a financial year ends, not when it starts. Article 5(6) of SI 2026/427 says the changes “do not apply in relation to any financial year of a charity ending before 30th September 2026.” A year ending on 31 August 2026 uses the old figures; a year ending on 30 September 2026 or later uses the new ones, even though most of that year ran before the change.

The Commission gives two worked examples. In its rules for charitable incorporated organisations, a CIO with a 31 October year end and income of £35,000 “must have the accounts independently examined” for the year ending 31 October 2025, but with £35,000 to £38,000 for the year ending 31 October 2026 “they do not have to get the accounts independently examined.” In its rules for charitable companies, a company with a 30 November year end and £1.1 million income needed an audit for 2025, but on £1.4 million for the year ending 30 November 2026 “the trustees can choose to have the accounts examined by a professionally qualified independent examiner rather than audited.”

Do not confuse this with the other 2026 date. The Charities SORP (FRS 102) 2026, the Statement of Recommended Practice for charity accounts, applies to reporting periods beginning on or after 1 January 2026, and Scotland’s new audit threshold keys on years beginning on or after the same date. Only the England and Wales thresholds turn on the year end.

Measuring income. For charities preparing accruals accounts, the Commission says “gross income is the total income as shown in the Statement of Financial Activities for all funds excluding the receipt of any endowment funds.” Restricted grants count; a new endowment does not. Measuring assets. The assets test uses the total value of assets at the year end before deducting liabilities, and applies only if income is also over £500,000.

A charity near a boundary should forecast its income at the start of the year and agree then which form of scrutiny it expects to need. A one-off legacy or capital grant can carry a year over £1.5 million, and an examiner or auditor found in the final month has less time to do the work.

Audit or independent examination, and when the choice is taken away

The two are different exercises. The Commission says “An audit is an in-depth review of the charity’s accounts and gives an opinion on whether the accounts are true and fair.” By contrast, “An independent examination is a less in depth review than an audit. It is often chosen by smaller charities and focuses on ensuring accounts match the charity’s records.” An examiner reports whether any matter has come to their attention, not whether the accounts are true and fair, as the Commission’s examiners’ guidance (CC32) explains. Below £500,000 of income the examiner need not be qualified, only an independent person “reasonably believed by the trustees to have the requisite ability and practical experience to carry out a competent examination of the accounts”.

Between £40,000 and the audit threshold the choice is the trustees’, but an audit can still be required below the statutory threshold:

• The governing document. The Commission’s CIO rules say there is no requirement at £40,000 or less “unless your governing document or a funding agreement requires one or the other.” Some older constitutions require an audit at any income, and that clause still binds.
• A funder. A grant agreement may require audited accounts as a condition of funding.
• The Companies Act 2006. The Commission says “Some charitable companies must have an audit under the Companies Act 2006”, which has its own tests. A charitable company audited under the Charities Act but exempt from a Companies Act audit “must include a statement on the balance sheet that the company is exempt from a Companies Act audit.”
• The Commission. “The Charity Commission can require an audit of your charity’s accounts in cases where there may be misconduct or mismanagement”. The power, in section 146 of the Charities Act 2011, also covers accounts not examined or audited within 10 months of the year end, and any year in which the Commission considers an audit desirable; if the Commission appoints the auditor, it can recover the cost from the trustees personally.

Before relying on the new thresholds to drop from audit to examination, or from examination to nothing, read the governing document and every current grant agreement. The Commission’s financial controls guidance is plain: “Charities must also have an external audit if required by their governing document.”

Scotland and Northern Ireland

There is no single UK charity audit threshold. In Scotland, the Charities Accounts (Scotland) Amendment Regulations 2025 raised the audit threshold from £500,000 to £1,000,000 for financial years beginning on or after 1 January 2026. OSCR’s external scrutiny guidance says an audit is required where gross income is “£1,000,000 or more (£500,000 for accounting periods beginning before 1 January 2026)”, where a charity preparing fully accrued accounts has gross assets at the year end over £3,260,000, or where the governing document, another enactment, a funder or the trustees require one. Note “or more” in Scotland, against “exceeds” in England and Wales.

Every other Scottish charity must have an independent examination, whatever its income, under regulation 11 of the Charities Accounts (Scotland) Regulations 2006, as amended. Where it prepares fully accrued accounts, the examiner must be a member of a listed body, a full member of the Association of Charity Independent Examiners or the Auditor General for Scotland. OSCR’s charity accounting page says fully accrued accounts “are required for charities with a gross income of £250,000 or more”; that figure did not change.

In Northern Ireland, section 65 of the Charities Act (Northern Ireland) 2008 requires an audit where gross income “exceeds £500,000”; otherwise the accounts must be examined or audited at the trustees’ election, and above £250,000 the examiner must be a member of a listed body or a full member of the Association of Charity Independent Examiners. The Charity Commission for Northern Ireland’s annual reporting guidance puts it simply: “All charities must have their accounts independently reviewed.”

So a small Scottish or Northern Irish charity cannot rely on the England and Wales £40,000 exemption. A charity registered with more than one regulator should check each regulator’s rules for the same year.

Getting ready, and what to record

The choice of scrutiny is a trustee decision and belongs in the minutes. At the first meeting of the financial year, or when the budget is approved, record:

1. the expected gross income and, if relevant, total assets, and which threshold that puts the charity under;
2. that the governing document and current funding agreements have been checked for any audit requirement;
3. the trustees’ election between examination and audit where the law allows a choice, and the reason;
4. the appointment of the examiner or auditor, their independence, and for an examiner over £500,000 their qualifying body;
5. a review point if income moves towards a boundary during the year.

An examiner or auditor works from the accounting records the trustees must keep under section 130 of the Charities Act 2011, or, for a charitable company, under the Companies Act 2006. The Commission’s rules for charitable companies say “all charities must keep financial records such as cash books, invoices, receipts and Gift Aid records for at least 6 years”, and our charity record keeping guide covers what to keep.

Two duties follow from appointing an examiner or auditor. The Commission’s Internal financial controls for charities (CC8) says “Auditors and independent examiners must report any matters of material significance to the Charity Commission”, so a weakness in internal controls that the trustees have not dealt with may reach the regulator. And “If your charity is required to have an external audit, you should have an internal audit committee.” The examiner’s or auditor’s report then goes into the annual report and accounts; our trustees’ annual report guide covers the report itself.

What the examiner asks to see

An examiner or auditor tests the accounts against the trustees’ decisions: the grant accepted with conditions, the reserves drawn down to cover a late payment, the payment to a trustee’s firm, the designation made before the year end. They ask for the minute, and for the evidence behind it. In a small charity many of those decisions were not made in a meeting. The treasurer asked the chair by text, two trustees agreed in a group chat on a Sunday, and the minute that records them was written weeks later from memory.

Those messages are the evidence of when a decision was made and who made it. If they sit on trustees’ personal phones, the charity cannot produce them, and when a trustee stands down they go too. A lower threshold can mean a less formal review, but it does not change what the trustees must be able to show.

ComplyChat gives a board and its staff channels the charity owns, with everyone told the conversation is on the record from the first message. On paid plans, once the charity’s Microsoft 365 tenant is connected, the lasting record files there under the charity’s own retention rules. It is not accounting software, it does not prepare accounts and it is no substitute for an examiner or auditor.

A question for the next board meeting: if the examiner asked to see the approval for the year’s three largest payments, would it come from the charity’s records or from someone’s phone?

Questions people ask

What is the charity audit threshold for 2026?

For financial years ending on or after 30 September 2026, a charity in England and Wales must be audited if its gross income exceeds £1.5 million, or if its gross income exceeds £500,000 and its assets exceed £5 million, under section 144 of the Charities Act 2011 as amended by SI 2026/427. For years ending before 30 September 2026 the figures were £1 million, and £250,000 with assets over £3.26 million.

What are the audit requirements for charities in the UK?

Each UK charity regulator has its own thresholds: in England and Wales an audit is required above £1.5 million income (or £500,000 with assets over £5 million) for years ending on or after 30 September 2026; in Scotland at £1 million or more for years beginning on or after 1 January 2026 (or assets over £3.26 million where accruals accounts are prepared); in Northern Ireland above £500,000. Below those, an independent examination is required in England and Wales once income exceeds £40,000, and in Scotland and Northern Ireland at any income.

Do small charities need an audit?

Not by law in England and Wales: a charity with gross income of £40,000 or less needs neither an audit nor an independent examination for financial years ending on or after 30 September 2026, unless its governing document or a funding agreement requires one, or the Commission orders an audit under section 146. Above £40,000 the trustees may choose an independent examination instead of an audit until the audit threshold is reached.

Do small club accounts need to be audited?

A club that is a charity in England and Wales needs an audit or independent examination under the Charities Act 2011 only once its income exceeds £40,000, for years ending on or after 30 September 2026, though its own rules, a funder or a Commission order can require one at any size. A club that is not a charity is outside these charity rules; one set up as a company has its own Companies Act 2006 tests.

When does the £40,000 independent examination threshold apply?

The £40,000 threshold applies to financial years ending on or after 30 September 2026: SI 2026/427 came into force that day and its changes do not apply to any financial year ending before it. The Commission’s example is a CIO with a year ending 31 October 2026 and income of £35,000 to £38,000, which no longer needs an examination.

Official guidance and your next step

The law is in section 144 and section 145 of the Charities Act 2011, as amended by SI 2026/427. The Charity Commission’s Threshold changes at a glance and Changes to charity accounting and reporting explain the change, and its rules for CIOs and charitable companies give the worked examples. Scottish charities should read OSCR’s external scrutiny guidance, and Northern Irish charities CCNI’s annual reporting guidance. Quotations are from those pages as published on 8 October 2026.

This guide is a summary of the law in England and Wales, with notes for Scotland and Northern Ireland, not legal or accounting advice. Your examiner or auditor can confirm which scrutiny applies to a given year.

Then do one thing: find the clause in your governing document about audit or examination, and write next to it the threshold your charity falls under for the current financial year. If the clause asks for more than the law does, that clause is the rule.