Cheers for Tiers: Charity thresholds on the move

Charity thresholds have lagged behind inflation

You won’t have missed that the cost of running a charity continues to climb, not least the costs of employment and energy. Charities are having to adjust their funding or fees, where they can, to keep pace. Some of our smaller charity clients who are used to having their accounts independently examined have, for the first time, exceeded the £1 million audit threshold or are about to do so. For sure, audit brings greater assurance and more scrutiny on systems and internal controls leading to valuable recommendations, but stepping up into audit is an extra expense, and many charities naturally take exemption when they can.

When will thresholds rise?

Company size threshold rises were confirmed in 2024, increasing the medium sized company financial thresholds by broadly 50% for periods starting 6 April 2025, taking the turnover element of the threshold relevant for audit to £15 million. The charity audit threshold last rose back in 2015, rising then from £500,000 gross income to £1 million for charities in England and Wales. Other thresholds covering registration and scrutiny have been static for longer. It’s definitely time they moved.

Consultation on charity law financial thresholds

In April 2025, the Department for Culture, Media and Sport (DCMS) launched a 10-week consultation on various financial thresholds applying to charities, such as registration, various forms of financial accounts and reports, and independent examination or auditing for those accounts and reports.

The consultation seeks views on whether to increase all 21 financial thresholds in charity law, either in line with inflation or at a lower increase, or to keep them at current rates. The stated aim of the review is to make sure that charities remain transparent and accountable while reducing unnecessary admin burden. Three options are considered for each threshold: doing nothing; increasing the threshold in line with inflation; or a 20% increase from the baseline.

Changes could include:

• Registration threshold rising from £5k to £10k income – Government backs 5k
• Annual return threshold rising from £10k to £20k income – Government backs 10k
• Filing accounts to Charity Commission threshold rising from £25k to £40k income
• Independent examination threshold rising from £25k to £40k income
• Receipts and Payments accounts option threshold (non-company charities) rising from £250,000 to £400,000 income*
• Audit threshold rising from £1 million to £1.5 million income
• Asset threshold on audit rising from £3.26 to £5 million (associated income threshold now at £250,000 – would rise with R+P accounting threshold* above)

To reiterate: any or all of those thresholds could move or stay still.

The consultation is open for 10 weeks, closing 12 June 2025. Larking Gowen will be responding to the Consultation. In particular, we will support the increase in Audit threshold to £1.5 million, to keep charity regulation proportionate. Please tell us if you have strong views that you’d like reflected in our response

Other thresholds are also moving

1. Scottish charity audit threshold

The audit threshold for Scottish registered charities (which affects English charities operating in Scotland) is to rise from income of £500,000 to £1 million. This will match the current English threshold, but may soon be left behind. No timescale has been announced.

2. Charity accounting thresholds

The current charity SORP distinguishes its accounts disclosure rules between those that apply to all charities and additional requirements for “larger” charities. Larger charities are defined as having gross income exceeding £500,000. A new SORP 2026 has been issued in Exposure Draft which divides disclosure requirements into three Tiers: Tiers 1 and 2 are divided at the £500,000 income threshold, and Tier 3 applies at income above £15 million, corresponding to recently changed turnover element of the small company threshold that triggers Companies Act audits.

3. Audit thresholds for Cooperative & Community Benefit Societies (CCBSs)

The Law Commission has conducted an extensive review of the CCBS Act 2014. A charitable CCBS must be audited when its annual income is just £250,000. The recommendation was that charitable community benefit societies should no longer be exempt charities. Then charity law would apply to them in full, including the rules about audits. We understand that many respondents supported raising the audit thresholds for charitable CCBSs, to reduce administrative burdens and costs. The final report is promised for issue in 2025, but regulation change will take longer.

Of the above, only the Scottish audit threshold increase is “final”. We know timing only for the new SORP implementation (but not what will be in it). We encourage the regulators not to delay longer than they need, and to implement the proposed changes as soon as possible.

Have your say

If you would like to add your views to our response to the consultation, please get in touch with me. You can find contact details on the Our People section of our website or email enquiry@larking-gowen.co.uk.

Emma Hayward