Charity accounting is changing in 2026: every threshold, and what it means for your charity
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Two separate things are changing for charities in 2026, and they have two different dates. Most of the coverage muddles them together, so here they are, cleanly.
One: the accounts thresholds are changing. From 30 September 2026, the income levels at which a charity needs an examination, needs a qualified examiner, needs an audit, or can use simpler accounts, all move upward. Fewer small charities will need formal scrutiny. Some larger ones will move out of audit and into the lighter independent examination.
Two: the Charities SORP has been rewritten. The new Charities SORP 2026 already applies to accounting periods beginning on or after 1 January 2026. If you prepare accruals accounts, the way you recognise income and account for leases is changing, and for many charities that is more work, not less.
This page explains both, with the actual numbers, and flags the one change almost nobody has noticed: a band of charities that must be audited today will be able to choose a cheaper independent examination instead.
These changes are confirmed by the Charity Commission but some take effect later in 2026, so always check GOV.UK for the current position. We re-check these figures against the Commission before the 30 September 2026 switchover.
The thresholds: what changes on 30 September 2026
These changes apply to accounting years ending on or after 30 September 2026. They apply in England and Wales. The Charity Commission describes them as expected to come into effect on that date.
| Requirement | Now | From 30 September 2026 |
|---|---|---|
| Accounts must be independently examined | Income over £25,000 | Income over £40,000 |
| The examiner must be professionally qualified (a member of a body named in the Charities Act) | Income over £250,000 | Income over £500,000 |
| Non-company charities can choose receipts and payments accounts (simpler cash accounting) | Income under £250,000 | Income under £500,000 |
| Accounts must be audited | Income over £1,000,000, or gross assets over £3.26 million | Income over £1,500,000, or gross assets over £5 million |
| Group accounts must be prepared and audited | Group income £1,000,000 | Group income £1,500,000 |
Read that table by finding your charity's income, not by reading top to bottom. The change that affects you depends entirely on where you sit.
What the threshold changes mean, charity by charity
Bigger thresholds sound like less work. For some charities that is true. For others it is the opposite, and for one group it is a real saving. Here is who is who.
If your income is under £40,000
From 30 September 2026 you will not need an independent examination at all (the trigger rises from £25,000 to £40,000). If your income sits between £25,000 and £40,000 today, that requirement falls away. Check your governing document though, because some constitutions require an examination or audit regardless of what the law says.
If your income is between £40,000 and £500,000
You need an independent examination, and you can choose the simpler receipts and payments accounts (the ceiling for those rises from £250,000 to £500,000). Below £500,000 you no longer need a qualified examiner as a matter of law, though the Commission still recommends one if you prepare accruals accounts, because the SORP is not something to attempt untrained.
If your income is between £1 million and £1.5 million
This is the change worth acting on. Today you must be audited. From 30 September 2026 you can have an independent examination instead.
An examination is a lighter, narrower check than an audit, and it costs considerably less. For a charity at this size that is a real saving, every year.
But there is a catch, and it is the reason to plan ahead. Above £500,000 the examiner must be a member of one of the accountancy bodies named in the Charities Act. The Association of International Accountants is on that list. We hold an AIA practising certificate, so we can act. Many audit firms will not want to do examination work at examination prices, so if this is you, it is worth a conversation before your year end rather than after it.
If your income is over £1.5 million (or assets over £5 million)
You still need a full audit. We do not audit, so at this level we would refer you to an audit firm. But we can still handle the accounts preparation, the SORP work, and the bookkeeping that sits underneath the audit.
The other change: Charities SORP 2026
The Charities SORP is the rulebook for how charities that prepare accruals accounts present their finances. It has been rewritten, and the new version, Charities SORP 2026, applies to accounting periods beginning on or after 1 January 2026.
If your charity prepares receipts and payments accounts, most of this does not touch you. If you prepare accruals accounts, it does, and two changes in particular mean more work.
The three-tier structure
SORP 2026 sorts charities into three tiers, with more required of the larger ones:
- Tier 1: income up to £500,000
- Tier 2: income £500,000 to £15 million
- Tier 3: income over £15 million
The smallest charities get the lightest requirements. The reporting and disclosure obligations step up as you move through the tiers.
Income recognition has changed
SORP 2026 brings in a new model for recognising income, following the change to the underlying accounting standard, FRS 102. For charities the tricky part is telling apart exchange transactions (you gave something of roughly equal value in return) from non-exchange transactions (donations, most grants, legacies). The two are now recognised differently, and getting the split right matters. This is exactly the sort of judgement where a specialist earns their fee.
Leases now go on the balance sheet
This is the one that catches people. Under the old rules, most charity property leases sat off the balance sheet as a simple rental expense. Under SORP 2026, following FRS 102, a lease generally goes on the balance sheet as an asset and a liability.
If your charity rents its premises, this is not a technicality. Your balance sheet will look different, and if you pay a peppercorn or below-market rent (very common for charities using community or council buildings), there is a further "non-exchange" element to identify and measure. If your accounts are prepared by someone who has not kept up with SORP 2026, this is where it will go wrong.
And the Trustees' Annual Report has been refreshed
SORP 2026 asks for more in the narrative report, including clearer reporting on reserves, on future plans, and new sections on impact and on environmental, social and governance matters. None of it is arithmetic, but it takes thought, and trustees should set time aside for it rather than writing it the night before filing.
What you should actually do, and when
Nothing here needs panic. It needs a look at the calendar.
Work out which changes apply to you. It comes down to two things: your income, and whether you prepare receipts and payments or accruals accounts. If you are not sure which you prepare, that itself is worth a conversation.
If you are between £1m and £1.5m, look at this before your year end. Moving from audit to examination is a genuine saving, but only if the examination is done by a firm that is allowed to do it. That is a decision to make in advance, not in month ten.
If you prepare accruals accounts and you rent your premises, get the lease treatment right from the start of the year. It cannot be fixed neatly at the year end.
Do not assume "thresholds are going up" means less work. For a charity moving into the new SORP, or one that has to unpick income recognition and leases, it can mean more.
How we help charities
We are on the Charities Act list of bodies whose members can act as independent examiners, and we specialise in charity accounts. Most small practices are not on that list and do not.
We can:
- Examine your accounts (where we are not also your bookkeeper), including for charities moving down from audit
- Prepare your accounts and Trustees' Annual Report to Charities SORP 2026, including the new income recognition and lease treatment
- Do your day-to-day bookkeeping with proper fund accounting, so the year end is clean
One rule we will always be straight about: if we keep your books, we cannot also be your independent examiner. That is the independence rule, and it is absolute. We will tell you which side of that line any piece of work falls on before you engage us.
Xpert Tax Accountants is regulated by the Association of International Accountants. We are not authorised or regulated by the Financial Conduct Authority and we do not give investment, pension or insurance advice, or arrange financial products. Our content is general information about UK tax, not advice for your circumstances, and no responsibility is accepted to any person acting on the basis of it.
Charity accounting changes: frequently asked questions
When do the new charity thresholds take effect?+
They are expected to come into effect on 30 September 2026, and apply to accounting years ending on or after that date, in England and Wales. The Charity Commission has announced them; always check GOV.UK for the current position, as some detail is still being finalised.
When does the new Charities SORP apply?+
Charities SORP 2026 applies to accounting periods beginning on or after 1 January 2026. It affects charities that prepare accruals accounts.
Our charity's income is £45,000. Do we still need an examination?+
Under the current rules, yes, because you are over £25,000. From 30 September 2026 the trigger rises to £40,000, so you would still need one. A charity between £25,000 and £40,000, on the other hand, would no longer need an examination from that date.
We are audited and our income is about £1.2 million. Does anything change for us?+
Yes, and it is good news. From 30 September 2026 the audit threshold rises to £1.5 million, so a charity at £1.2 million can choose an independent examination instead of a full audit. An examination costs considerably less. You will need an examiner who is on the Charities Act list, which we are.
What is the biggest practical change in SORP 2026?+
For most charities that prepare accruals accounts and rent their premises, it is that leases now generally go on the balance sheet, rather than being treated simply as rent. The new income recognition rules, especially telling exchange from non-exchange transactions, are the other significant change.
Can we switch to simpler receipts and payments accounts?+
Possibly. From 30 September 2026 non-company charities with income under £500,000 can choose receipts and payments accounts, up from £250,000 today. Whether it is right for you depends on your circumstances and your funders' requirements, but for many smaller charities it is a genuine simplification.
Does any of this apply to charitable companies or CICs?+
Charitable companies have additional requirements under company law, including filing at Companies House, and CICs are not charities at all and have their own regime. Tell us which you are and we will tell you which rules you are actually under. It is a common and understandable confusion.
Not sure which changes apply to your charity?
Tell us your income and how you prepare your accounts, and we will tell you exactly what changes and when. We are on the Charities Act list and can act as your independent examiner.