Charity financial threshold changes confirmed

On 31 October 2025, the Government announced the outcome of its consultation on financial thresholds in charity law, led by the Department for Culture, Media and Sport (DCMS). Some thresholds, including the audit threshold, have risen to broadly reflect inflation; some, including the registration threshold, have stayed the same.

What’s changing?

The Government has opted for an increase of up to 100% in several key financial thresholds relating to scrutiny and financial reporting. These changes are anticipated to apply to accounting years ending on or after 30 September 2026.

Key threshold increases:

• Independent examination threshold: Raised from £25,000 to £40,000 income
• Receipts and Payments accounts option (non-company charities): Increased from £250,000 to £500,000 income
• Audit threshold: Increased from £1 million to £1.5 million income
• Asset threshold for audit: Increased from £3.26 million to £5 million (associated income threshold increased from £250,000 to £500,000)
• Group accounts preparation threshold: Increased from £1 million to £1.5 million income

A key impact: The audit threshold

The audit threshold increase from £1 million to £1.5 million is particularly significant. This change reflects inflationary pressures since the last adjustment in 2015, when the threshold was raised from £500,000 to £1 million.

This update is intended to ease the burden on smaller charities, many of which were being drawn into audit requirements that felt disproportionate to their size and complexity.

What’s staying the same?

Several thresholds related to transparency and regulatory permissions will remain unchanged, including:

• Registration threshold: £5,000
• Annual return threshold: £10,000
• Filing accounts with the Charity Commission: £25,000

This approach maintains public oversight and transparency.

Reflections on the consultation process

The consultation, which ran for 10 weeks from April to June 2025, offered three options for each threshold:

1. No change
2. Inflationary adjustment
3. A 20% increase

In our submission, we supported the 20% uplift for most thresholds, although higher for audit, aligning with the sector’s call for proportionality.

In our view, the outcome reflects a balanced response to sector feedback. It acknowledges the Law Commission’s 2017 recommendation for periodic reviews and marks the first comprehensive threshold update since 2015.

We welcome the outcome and the relatively swift implementation timeline, which allows charities to plan while benefiting from reduced regulatory burden.

When will the changes apply?

These changes are expected to come into effect on 30 September 2026, applying to accounting years ending on or after that date.

In practice, this means charities with 12-month accounting periods starting now will be subject to the new thresholds.

DCMS will need to take legislation through Parliament to introduce these changes, which is expected during 2026.

Need help?

If you're unsure how these changes affect your charity, or if you'd like support with your financial reporting and audit requirements, we're here to help. Get in touch with your usual Larking Gowen contact or email enquiry@larking-gowen.co.uk.

Chris Yeates