Charity Accounting Has Changed. What Do Accountants Need to Check?
For charities and the accountants supporting them, September brings an important change to the accounting and reporting landscape.
From 30 September 2026, new financial thresholds will apply to charity accounts in England and Wales. At the same time, SORP 2026 is already in effect for financial years beginning on or after 1 January 2026, bringing changes to charity accounting and reporting.
For practices with charity clients, that means this is not simply a case of updating a few figures in a checklist. The accounting and reporting regime that applies to a charity can now depend on a combination of its structure, income, assets and financial year end.
The question for accountants is: have your charity workflows, templates and software settings caught up?
The thresholds are moving
The Charity Commission has confirmed that several key thresholds will increase for financial years ending on or after 30 September 2026.
The changes include:
| Requirement | Before 30 September 2026 | From 30 September 2026 |
| Receipts and payments accounts for eligible non-company charities | £250,000 or less | £500,000 or less |
| Accruals accounts required above | £250,000 | £500,000 |
| Independent examination required above | £25,000 | £40,000 |
| Qualified independent examiner threshold | £250,000 | £500,000 |
| Main audit income threshold | £1 million | £1.5 million |
| Audit based on income and assets | £250,000 income + £3.26m assets | £500,000 income + £5m assets |
| Group accounts threshold | £1 million | £1.5 million |
The Charity Commission says the changes are intended to make accounting requirements more proportionate to the size of charities.
But the important point for practitioners is that the new thresholds do not apply simply because the calendar has reached 30 September.
They apply according to the charity’s financial year end.
That distinction matters.
The year end could change the accounting treatment
Consider a charity with income of £400,000.
Under the previous thresholds, that level of income would mean accruals accounts were required for an eligible non-company charity.
But if its financial year ends on or after 30 September 2026, the new threshold means it may be able to prepare receipts and payments accounts instead, assuming there is no requirement in its governing document to prepare accruals accounts.
The Charity Commission gives a similar example of an unincorporated charity moving from a requirement to prepare accruals accounts to having a choice under the new thresholds.
That creates an important workflow consideration.
A practice cannot necessarily look at a client’s income figure in isolation and apply a standard rule. It needs to consider:
- The charity’s legal structure
- Gross income
- Gross assets where relevant
- Group income where relevant
- Financial year end
- Whether its governing document imposes additional requirements
- Whether SORP 2026 applies
- Whether the accounts require an independent examination or audit
In other words, the threshold is only part of the decision.
Independent examination: £25,000 becomes £40,000
One of the most visible changes is the increase in the income threshold for independent examination.
For financial years ending before 30 September 2026, charities with income above £25,000 generally need an independent examination or audit, subject to the relevant rules.
For financial years ending on or after 30 September 2026, that threshold rises to £40,000.
That could mean some smaller charities that previously needed their accounts independently examined will no longer have that statutory requirement.
However, accountants should not automatically assume that an examination is no longer needed.
The Charity Commission notes that a charity’s governing document or a funding agreement may still require an independent examination or audit.
So, this is another area where simply changing the threshold in a spreadsheet isn’t enough.
The audit threshold is changing too
The main income threshold for mandatory audit is increasing from £1 million to £1.5 million.
There is also a revised income-and-assets test.
For financial years ending on or after 30 September 2026, a charity can fall within the mandatory audit requirement where it has:
- Gross income above £1.5 million; or
- Gross income above £500,000 and gross assets above £5 million.
The previous thresholds were £1 million, or £250,000 income combined with assets above £3.26 million.
Again, the effect will depend on the individual charity.
Some organisations may move out of mandatory audit territory. Others will remain subject to an audit because of their income, assets, structure or other requirements.
For practices, that makes client-by-client review more useful than a blanket communication.
And then there is SORP 2026
The threshold changes are not happening in isolation.
SORP 2026 applies to charities across the UK for financial years beginning on or after 1 January 2026.
The updated SORP introduces changes across areas including income recognition, leases, expenses, balance sheet reporting and disclosures.
For example, the updated guidance includes changes reflecting FRS 102 and provides new or revised guidance around income, including exchange and non-exchange transactions. It also introduces changes to lease accounting and disclosures.
Larger charities also face enhanced reporting expectations.
That means practices need to think about both sides of the change:
Has the charity crossed into a different accounting or scrutiny regime because of the new thresholds?
And:
Does SORP 2026 change how its accounts need to be prepared or presented?
Those are separate questions, and both need to be considered.
The software challenge
This is where charity accounting changes become particularly relevant to accounts-production software.
For an accounting practice, the ideal workflow should make it straightforward to identify the relevant reporting treatment based on the client’s circumstances.
But threshold changes can create problems if templates, product logic or internal processes continue to reflect the previous rules.
For example, practices may need to check:
- Charity-specific accounts templates
- Threshold logic
- Accruals versus receipts and payments workflows
- Independent examination requirements
- Audit triggers
- Group accounting thresholds
- SORP 2026 reporting requirements
- Disclosure requirements
- Client onboarding questions
- Internal review checklists
The risk is not necessarily that the numbers are wrong.
It is that the right numbers end up in the wrong reporting process.
Don’t just update the number
For practices with a portfolio of charity clients, now is a good time to run a structured review.
Identify affected charity clients
Start with clients whose financial years end on or after 30 September 2026.
Then look at their income and assets against both the old and new thresholds.
Clients sitting close to the thresholds deserve particular attention.
Check the charity’s structure
The rules differ depending on whether the organisation is a charitable company, CIO, trust or unincorporated association.
The Charity Commission has separate guidance for the main structures.
Review the current accounting basis
Could a charity that previously required accruals accounts now qualify for receipts and payments accounts?
Conversely, is there a reason it must continue preparing accruals accounts?
The answer should be documented rather than assumed.
Review examination and audit requirements
Check the new income and asset thresholds, but also consider governing documents, funding agreements and any other applicable requirements.
Check SORP 2026
For charities preparing accruals accounts, make sure the accounts-production process reflects the relevant SORP 2026 requirements.
Communicate with clients
For some charities, the change could mean a different level of external scrutiny or a different approach to preparing their accounts.
That is something worth discussing with trustees before the accounts are due, rather than discovering it during year-end work.
A good time to review your charity workflow
The biggest risk with regulatory change is often not the change itself. It is missing the point at which an existing process stops being appropriate.
With the new charity thresholds taking effect for financial years ending on or after 30 September 2026, and SORP 2026 already applying to relevant periods, practices have a clear reason to revisit how they handle charity accounts.
That could mean reviewing client records, updating checklists, checking accounts-production software and making sure the team understands which rules apply to which clients.
For accountants, the goal is not simply to know that the thresholds have changed.
It is to make sure the right accounting treatment, scrutiny level and reporting requirements are applied automatically and consistently throughout the practice.
The practical takeaway
Charity accounting is moving into a new phase, but the changes are not one-size-fits-all.
The new thresholds may reduce the regulatory burden for some charities, while SORP 2026 introduces new accounting and reporting requirements for others. The financial year end, legal structure, income, assets and other circumstances all matter.
For practices supporting charities, now is the time to check the client list, review the workflows and make sure the software and processes behind the accounts are ready for the new rules.
Because when the rules change, the workflow needs to change with them.
