At the same time, the threshold above which charities must seek independent examination of their accounts – an external verification which is a lighter touch than a full audit – will rise from £25,000 to £40,000. This move will both simplify matters and save costs for the smallest charities, of which we have many in our region.
Two other thresholds have seen big increases: the threshold for some charities to produce accrual accounts and the threshold above which certain qualification requirements to be an independent examiner apply, have both been doubled to £500,000. This change aligns with the new bottom tier of the updated SORP.
The new rules will come into operation from 1st October 2026, although it is not yet clear whether that means accounting periods starting or ending after that date.
Aside from the obvious cost-saving implications for charities, the significant rise will remove barriers to growth for charities which were hovering just below the former thresholds, which, it has been argued, no longer reflected the operational realities that many charities face.
As well as announcing the increased reporting thresholds, DCMS and the Charity Commission say they plan to consider further measures to support smaller charities, reflecting suggestions put forward during the consultation period.
It is right that charities are properly regulated to maintain public confidence in their governance, but the rules need to reflect the realities of the financial world in which they operate – and this announcement takes a big step towards achieving that aim.
