Charity accounting and reporting in the UK

Charity reporting has its own vocabulary, and most of the difficulty trustees experience comes from that rather than from the underlying figures. This guide sets out the shape of charity accounts in plain English so you know what is expected of your charity and when.

Who this is for

Trustees and treasurers of registered charities, unincorporated associations with charitable purposes, and charitable incorporated organisations. The detail differs between England and Wales, Scotland and Northern Ireland, because each has its own regulator and its own rules on registration, accounts and scrutiny. We confirm which regime applies to your charity before preparing anything.

Which basis of accounts applies

Broadly, smaller non-company charities below an income limit may be able to prepare receipts and payments accounts with a statement of assets and liabilities. Above that limit, and for charitable companies, accruals accounts prepared under the Charities Statement of Recommended Practice are required. Accruals accounts include a statement of financial activities, a balance sheet and notes.

Charity accounting and reporting rules vary by jurisdiction. The figures below apply to England and Wales only, for financial years ending on or after 30 September 2026, and are generally based on income:

• Annual return to the Charity Commission: income above £10,000.
• Trustees’ annual report and accounts filed with the Commission: income above £25,000.
• Independent examination: generally required above £40,000 income, unless an audit is required.
• Professionally qualified independent examiner: income above £500,000.
• Statutory audit: generally income above £1.5 million, or above £500,000 with assets above £5 million.
• Receipts and payments accounts: may be available to eligible non-company charities and CIOs with income of £500,000 or less, subject to the governing document and legal form.

All CIOs must register with the Charity Commission whatever their income, while some charities are exempt or excepted from registration. See GOV.UK: changes to charity accounting and reporting (opens in a new tab) and GOV.UK: charity accounts rules for CIOs (opens in a new tab).

Income limits and scrutiny thresholds are set by the regulators and change from time to time, so we check your income and constitution against the current rules rather than assuming last year’s treatment still fits.

Restricted and unrestricted funds

Charity accounting tracks not only what was spent but what it was allowed to be spent on.

• Unrestricted funds can be used for any of the charity’s purposes.
• Designated funds are unrestricted funds the trustees have earmarked for a particular use, and can be un-designated.
• Restricted funds must be used for the purpose specified by the donor or funder, and must be tracked separately.
• Endowment funds are held as capital, with rules on whether and how they can be spent.

The practical implication is that grant conditions and appeal wording matter. Recording fund type at the point income is received is far easier than reconstructing it at year-end, and it is what allows trustees to answer the question “can we spend this?” with confidence.

External scrutiny of the accounts

Many charities need some form of external scrutiny of their accounts, and the level depends on income, assets and the charity’s governing document. For eligible charities that is an independent examination: a review of the accounting records and accounts against specific requirements, reported on by the examiner. It is a different and lighter form of scrutiny than a statutory audit. Larger charities, and those whose governing documents require it, need a registered auditor instead.

We prepare charity accounts, and we do not provide independent examinations or audits. Where your charity requires an independent examination or an audit, it must be arranged separately with an appropriately independent provider; the person who prepares the accounts cannot also examine them. We will tell you clearly which level of scrutiny your charity appears to need so the right arrangements are made in good time before your filing deadline.

The trustees’ annual report

The accounts are accompanied by a trustees’ annual report. Depending on the size of the charity it covers matters such as the charity’s objects and activities, achievements and performance, financial review, reserves policy, and structure, governance and management. Larger charities include more, including a risk statement.

A reserves policy is worth taking seriously rather than treating as a form of words: it explains why the charity holds the free reserves it does, which is one of the first things funders and regulators look at.

Gift Aid and tax

Charities are exempt from tax on most of their charitable income, but the exemption is not automatic in every case and non-charitable trading can create a tax liability. Gift Aid allows eligible donations from UK taxpayers to be topped up, provided valid declarations are held and the donation is not a payment for goods or services beyond the permitted benefit limits.

Practical points: keep declarations retrievable, review them when donor details change, take care with sponsored events and with membership subscriptions, and remember that VAT and Gift Aid are separate questions. Trading through a subsidiary can be sensible where activity goes beyond primary purpose trading.

Records and controls

• Income recorded by fund and by source, with grant conditions kept with the record.
• Cash collections counted and recorded by two people where possible.
• Two authorisers for payments, and a clear delegated authority limit.
• Trustee expenses claimed on the same evidenced basis as anyone else’s.
• Minutes recording decisions with financial consequences.
• A fixed asset register, and records of any property held.

How Bee & Co can help

We prepare charity accounts on the correct basis, help trustees with the annual report and reserves policy, keep fund accounting straight through the year, and handle Gift Aid claims and payroll where relevant. See our compliance services, support services or get in touch.

This guide is general information and is not advice for your charity’s circumstances. Thresholds and regulator requirements differ across the UK and change over time, so please check with us before acting.