The Charity Commission is currently running a consultation about changing the financial thresholds that decide what type of financial accounts and reports a charity must submit. This is a relatively unusual occurrence – some of these thresholds were last updated in 2012. At Holy Brook Accountants, we’ve been reviewing the proposals and believe that one of the proposed changes in particular could have a big impact.
Increasing the audit threshold for charities
Currently charities with income of over £1 million must pay for a full audit.
There are of course, benefits to audit, and some charities choose to have an audit even below this threshold, but increasingly, charities are being forced by inflation to have an audit, when they previously may have decided an Independent Examination was a sufficient check for their level of complexity. The Charity Commission estimates that for charities with a turnover of between £ 1 million and £ 2 million the cost averages at £9,600 a year. In the current funding environment, many charities may feel that these funds might be better used elsewhere.
One of the proposed changes is to raise the audit threshold income, possibly to £1.5 million is a positive step in reducing unnecessary administrative strain and freeing up funds for delivering outcomes, while still maintaining oversight through independent examinations. This gives growing charities more room to focus on impact, rather than compliance costs. Our view is that it would be of benefit to charities, as the option for audit will remain, but gives trustees discretion to choose an Independent Examination, which provides external scrutiny but at a lower level of work and cost.
Raising the annual return threshold
The Commission has also suggested increasing the income threshold for submitting an annual return from £10,000 to £20,000.
Our view is that this would be a less positive step. At this low level of turnover, the annual return isn’t particularly complex, and can be completed by a trustee without professional help. However, it helps the public and potential donors see that a charity is active and accountable. With the current £10,000 floor, more small charities submit returns, which increases visibility and public trust. Raising it to £20,000 would lead to fewer listed charities with up-to-date information, which can affect donor confidence.
Consultation deadline and impact
The Consultation is open until 12 June 2025, and if you’d like to read it and share your views, you can do so here.
There are also a lot of potential changes so it is worth looking at how your charity may be affected – either before the consultation deadline or once the proposals have been finalised. In general, we are expecting most thresholds to increase so it is unlikely your charity will see an increase in requirements.
How Holy Brook Can Help
We work with many charities that fall within the thresholds being discussed, and we understand the real-world impact these changes could have.
If you’re not sure what these changes might mean for your charity or whether you need to change your reporting, we’re happy to help, Our team can:
- Talk through what the thresholds mean for your charity
- Help you plan for reporting requirements
If you would like to share your views on the consultation but don’t plan to submit a response yourself, feel free to contact our founder, Rachel, and she will include your input in the feedback we’re sending to the Charity Commission.
