Charity accounting threshold changes 2026

Changes to the charity accounting thresholds in 2026 will affect charities across England and Wales. These threshold changes may impact the type of accounts your charity prepares and whether you need an independent examination or an audit.

The changes will affect charities with accounting periods ending on or after 30 September 2026.

In addition, the new Charities SORP 2026 for charities preparing accruals-based accounts applies to reporting periods that have started on or after 1 January 2026.

This blog post will help your charity decide whether to keep creating accounts on an accruals basis (following the Charities SORP) or to change to creating accounts on a receipts and payments basis, if the threshold changes enable this. It provides a structured decision framework to help trustees evaluate what reporting basis is right for their charity.

How will the changes impact my charity?

While the changes may be straightforward for some organisations, for others they introduce an important governance decision — particularly around whether to move from Charities SORP accruals accounts to receipts and payments accounting.

For some charities, this will be simple:

• If you are a charitable company and registered at Companies House, your reporting framework does not change as company law requires that you create accounts on an accruals basis under the Charities SORP, regardless of income level.
• If your charity has an income over £500,000, you will need to continue creating accounts on an accruals basis.
• If your structure and funding are straightforward and you have an income under £500,000/year, it may be easy to assess that changing to receipts and payments will benefit your charity.

For others — especially those with material gifts in kind, timing differences, investments, property, or sensitive reserves — the decision requires more careful evaluation.

The new thresholds offer flexibility, but flexibility brings responsibility. The right decision depends on your charity’s individual circumstances.

Why are the charity accounting thresholds changing?

The UK Government’s Department for Culture, Media and Sport (DCMS) announced, following consultation, that charity accounting thresholds are set to increase. The thresholds determine which sizes of charity have to fulfil particular financial governance requirements, including independent examination, audit, and the types of accounts being prepared.

DCMS is the Government department responsible for charity law and regulation in England and Wales. It oversees charity legislation and works alongside the Charity Commission.

These threshold changes are long-awaited. Inflation has meant that the current limits have been out of date for some time.

What are the charity accounting threshold changes?

Here are the new charity accounting thresholds for England and Wales:

The threshold changes discussed in this article apply to charities registered in England and Wales only.

If you are a charity not based in England or Wales, contact your independent examiner or charity regulator to learn about the accounting thresholds applicable to your charity.

• OSCR in Scotland
• Charity Commission for Northern Ireland

How does the timing interact with SORP 2026?

The new Charities SORP 2026 applies to accounting periods beginning on or after 1 January 2026.

However, the threshold changes apply to periods ending on or after 30 September 2026.

These are two separate changes — and charities need to be clear on the difference.

Are receipts & payments accounts better?

If your charity’s income falls below the new £500,000 threshold, you may now be eligible to prepare receipts and payments accounts.

But eligibility does not automatically mean it is the right move.

Receipts and payments accounts are designed to be simpler. They focus purely on:

• Cash received during the year
• Cash paid during the year
• The cash balance at year-end

For very small charities with straightforward activity, limited commitments, and minimal complexity, this approach can work well. It is easier to prepare, easier to understand, and may reduce professional costs.

However, trustees should pause before assuming that ‘simpler’ automatically means ‘better’.

What do receipts & payments accounts do well?

Receipts and payments accounts:

• Provide a clear picture of cash movement.
• Are relatively straightforward to prepare.
• Can be appropriate where transactions are simple and timing differences are minimal.
• May reduce the reporting burden for smaller charities with limited financial risk.

For charities that operate almost entirely on a cash basis — with no significant grants spanning year ends, no major assets, and no complex funding arrangements — receipts and payments accounts may be very suitable.

What do receipts & payments accounts not show?

However, receipts and payments accounts do not:

• Show unpaid bills (creditors).
• Show income earned but not yet received (accrued income).
• Reflect grant income recognised over time.
• Present debtors and creditors clearly.
• Recognise significant commitments or provisions.
• Present a full balance sheet in the same structured way as SORP accruals accounts.
• Demonstrate a ‘true and fair view’ in the same comprehensive sense as accruals accounting.

This means the reported result for a year can be materially different depending purely on when cash happens to move.

How does our charity make an informed decision?

If your charity’s income falls below £500,000, you may now have a choice.

But the right reporting basis is not about what is legally permitted. It is about what best reflects your charity’s financial reality and supports good governance.

Before deciding to move to receipts and payments, trustees and key management could work through the following structured questions.

Step 1: complexity – how simple are we really?

• Do we have multiple restricted or designated funds?
• Do we carry forward grant balances from one year to the next?
• Do we operate a trading subsidiary or prepare group accounts?
• Do we hold property or significant fixed assets?

If the structure is complex, accruals accounting may better reflect reality.

Step 2: timing – does cash reflect performance?

• Do we receive grants in advance for future activity?
• Do we regularly accrue income at year end?
• Do we have significant unpaid bills or year-end accruals?
• Are legacy receipts recognised before cash is received?
• Would removing accruals materially change how a year appears?

If timing differences are significant, receipts and payments accounts may distort performance.

Step 3: reserves – is our position sensitive?

• Is our reserves level tight or closely monitored?
• Would removing creditors or accrued income materially change our reported reserves?
• Do funders rely on our reserves disclosure?
• Could receipts and payments make us appear artificially stronger or weaker?

Where reserves are sensitive, accruals accounting usually provides a clearer picture.

Step 4: investments & non-Cash Activity

• Do we hold material investment portfolios?
• Are gains and losses significant year to year?
• Do we receive substantial gifts in kind (e.g. food bank stock, donated goods, donated services)?
• Do we receive significant donated assets?

If non-cash transactions are material, receipts and payments may understate the scale of activity.

Step 5: long-term commitments

• Do we have lease liabilities (particularly under SORP 2026)?
• Do we have defined benefit pension liabilities?
• Do we have long-term funding commitments or provisions?

Receipts and payments reduce visibility over long-term obligations.

Step 6: governance & perception

• Do funders expect SORP accounts?
• Would simpler accounts reduce clarity for trustees?
• Would stakeholders view the change as reduced transparency?
• Would it affect confidence in our stewardship?

Accounting is not just technical — it shapes how your charity is perceived.

Step 7: future planning

• Are we planning growth, a major appeal, or a capital project?
• Are we likely to exceed £500,000 again soon?
• Would switching now only to revert later create disruption?

Switching accounting basis twice within a few years can add unnecessary complexity.

Changing to receipts and payments accounts in ExpensePlus

If your organisation uses the fund accounting software ExpensePlus, then you may be wondering what the practical impact would be of changing from accruals to receipts and payments as your accounting basis.

If your organisation chooses to switch to receipts and payments, the ExpensePlus team can help you set up a new instance of ExpensePlus on a receipts and payments basis and transfer relevant setup information. And you would keep free access to your prior financial years on an accruals basis.

See this article on changing accounting basis in ExpensePlus for more information about this.

A simple decision rule for deciding what type of accounts to prepare

Considering the 7 steps above, you should ask yourselves: Would moving to receipts and payments materially change how an informed reader understands our financial health?

If the honest answer is ‘yes’, then remaining on SORP accruals accounting may be the more responsible and transparent choice – even if you are legally allowed to simplify following the threshold changes.

The bottom line in deciding how to respond to the threshold changes

Falling below £500,000 gives you flexibility.

It does not remove your responsibility to present meaningful, transparent financial information.

For some very small charities with straightforward finances, receipts and payments will be entirely appropriate.

For others, SORP accruals accounting may better support good governance and informed decision-making, particularly where there are:

• Complex restricted funding sources
• Significant timing differences
• Material investments
• Property or lease commitments
• Sensitive reserves

The decision should be deliberate, documented in trustee minutes, and taken with professional advice where appropriate.

If you would like support in reviewing your structure, reserves position, funding arrangements, or future plans before making a decision, do feel free to get in touch with the team at Wyatt & Co Chartered Accountants.