Charitable organisations handle large sums of money and rely on public trust to attract donors. For the 2025/26 tax year, trustees must understand the audit threshold for charities and the difference between an independent examination and a full statutory audit.
In this blog, we explain the current threshold, highlight when a full audit is required, and discuss how trustees play a part in ensuring compliance. We also consider how audits and examinations affect financial transparency and donor confidence.
What is the statutory audit threshold for charities?
In England and Wales, charities must have a statutory audit if either of these conditions applies:
- Their annual income is over £1 million.
- Their gross assets exceed £3.26m, and their annual income exceeds £250,000.
These figures remain in place for the 2025/26 tax year. Some charities that do not meet these criteria choose a statutory audit for added scrutiny, but it is only mandatory if your organisation meets or surpasses the set figures. If you are uncertain about your obligations, refer to the Charity Commission’s official guidance or consult an adviser.
When is an independent examination sufficient?
An independent examination is often sufficient if your charity’s income is below the £1m threshold (and does not meet the asset-based requirement). This review focuses on whether your charity’s accounts comply with legal requirements and whether proper records are maintained.
It is less exhaustive than a full audit, but it still provides trustees and donors with reasonable assurance that financial statements are accurate.
Independent examiners can be individuals with suitable qualifications or relevant financial expertise. They do not have to be practising accountants unless their annual gross income exceeds £250,000. Trustees must confirm that the examiner they appoint meets the requirements set out by the Charity Commission and is independent of day-to-day finances.
The role of trustees in ensuring compliance
Trustees oversee governance and must confirm that the charity meets its statutory obligations. Their duties extend to verifying whether the charity’s income or assets reach the audit threshold for charities and ensuring that all relevant returns, filings, and financial statements are submitted on time.
They should also:
• Keep comprehensive financial records showing a clear income and expenditure trail.
• Maintain up-to-date financial controls, such as regular bank reconciliations, separate accounts for restricted funds, and approval processes for significant expenses.
• Monitor potential risks that could affect cashflow and plan for changes in income or expenditure.
Regular trustee meetings allow a close review of finances and mean you can act quickly if you are nearing the statutory audit threshold. This approach keeps everyone informed and helps prevent surprises when the accounts are prepared.
How audits affect financial transparency
Full audits add a deeper level of scrutiny. An auditor checks whether the financial statements provide a true and fair view of the charity’s financial position, which is particularly important for larger organisations.
Their detailed work includes:
• Testing internal controls.
• Assessing accounting estimates, such as provisions for liabilities.
• Confirm that the statements comply with relevant accounting standards and the Charity Commission Statement of Recommended Practice (SORP).
Because donors and grant-makers often seek reassurance that funds are being spent correctly, an audit can boost confidence. The Charity Commission observes that transparency increases public trust, so an audit can have reputational benefits. Many institutional donors, who might request audited accounts as part of their due diligence before awarding grants, share this view.
The impact on donor confidence
Many donors want proof that their money is handled with care. If your charity meets the audit threshold for charities, conducting a thorough statutory audit can help reassure existing donors and attract new supporters. Even smaller charities not subject to a mandatory audit sometimes opt for one to strengthen donor confidence.
In the UK, total charitable donations exceed £10 billion annually (according to multiple sources, including the Charities Aid Foundation). This sum underlines how competitive the sector can be, and donors often prefer charities that demonstrate clear oversight of their finances. If a charity’s finances are not scrutinised in detail, some potential supporters might choose to give to organisations that provide higher levels of transparency.
Practical steps for trustees
You can prepare well in advance by creating a timeline for your charity’s annual reporting. This schedule should account for:
• Collecting financial records and receipts.
• Reconciling your accounts each month.
• Appoint your independent examiner or auditor and agree on fees.
• Meeting deadlines for filing annual returns.
You should also pay attention to the specific requirements if your charity is structured as a charitable company. Companies House may have additional or parallel filing obligations. Charitable company trustees must comply with charity and company law, making record-keeping even more important.
At Venthams, we have helped many charities manage these requirements and prepare for independent examinations or full audits. Our team understands how detailed the process can be, and we work with you to organise financial records, assess internal controls, and stay up to date with HMRC guidance. By handling these requirements efficiently, we aim to free up more time for your charity’s core activities.
Choosing between an audit and an independent examination
An independent examination often suffices if your charity’s income or asset size is below the threshold. However, some boards may feel more comfortable with a full audit for added reassurance. Others might be guided by funders who insist on an audit as a grant condition.
Your choice depends on factors like financial complexity, the number of funding streams, and any concerns about the robustness of existing controls. However, trustees cannot opt for an independent examination when there is a legal requirement for a statutory audit.
Keeping an eye on future changes
We have seen changes to charity regulations in previous years, so keep track of any new government announcements or Charity Commission updates that might adjust thresholds. You should monitor potential developments in the run-up to each financial year. If your charity’s gross income is close to £1m or your assets are nearing £3.26m, checking the exact figures for your annual reporting cycle is wise.
If updated guidance surfaces, our team at Venthams will share information on our website to help you make the right decisions.
Summing up
Meeting audit and examination requirements is an important part of effective governance for charities, especially in the 2025/26 tax year. Trustees must identify whether they need an independent examination or a full audit and ensure timely compliance with relevant rules. Choosing the right approach can sustain donor confidence and maintain transparency about your finances.
If you would like expert support in preparing for your charity’s audit or independent examination, call or message us. We will guide you through the process and ensure you know the charities’ audit threshold.