A charity in England and Wales prepares one of two kinds of accounts: receipts and payments accounts or accruals accounts. A charitable company has no choice and must prepare accruals accounts. An unincorporated charity, a trust or a charitable incorporated organisation (CIO) can prepare receipts and payments accounts if its gross income is £500,000 or less for a financial year ending on or after 30 September 2026. Above that, accruals accounts under the Charities SORP are required.
The limit was £250,000 for years ending before 30 September 2026, so a £250,000 figure no longer applies to current years.
The short version
| Your charity | Which accounts |
|---|---|
| Charitable company | Accruals accounts, always |
| Unincorporated charity or CIO, gross income £500,000 or less (years ending on or after 30 September 2026) | Receipts and payments accounts allowed |
| Unincorporated charity or CIO, gross income over £500,000 | Accruals accounts |
| Any charity whose governing document or a funder requires accruals | Accruals accounts |
| Any charity that simply prefers accruals | Accruals accounts |
That table rests on one phrase from the Charity Commission's guidance: receipts and payments is something you can do, not something you must do. The Commission's CIO guidance says you can use it unless your governing document says you must prepare accruals accounts, or you choose to.
What the two kinds of accounts are
The Charity Commission's guidance describes two types of accounts. For most charities, which one you must prepare depends on annual gross income.
Receipts and payments accounts consist of two statements:
- a statement of receipts and payments, showing the movement of cash into and out of the charity during the financial year; and
- a statement giving details of the charity's assets and liabilities at the end of the financial year. Liabilities here means amounts owed to other people and organisations.
Accruals accounts must give a true and fair view. They contain:
- a balance sheet showing the charity's financial position at the end of the year;
- a statement of financial activities (SOFA), showing for the year all money received or due to the charity and all money spent or incurred by it; and
- explanatory notes.
The difference is in the words "due" and "incurred". A receipts and payments account records cash when it moves. An accruals account also records income the charity is owed and costs it has taken on but not yet paid. To make accruals accounts true and fair, the Commission says to follow the SORP.
Which charities can use receipts and payments accounts
The Commission's threshold table says it plainly: an unincorporated charity and a CIO can prepare receipts and payments accounts. Charitable companies cannot. The Commission's guidance for charitable companies opens its section on account types with one sentence: all charitable companies must prepare accruals accounts.
If you do not know what type of charity you are, the Commission's advice is to check your governing document. The Commission publishes separate guidance for trusts and unincorporated associations, for charitable companies and for CIOs, and you should read the one that matches your charity.
Two further points shape the choice:
- Your governing document may require accruals accounts, and the limit does not override it.
- A funder may require accruals accounts as a condition of a grant. The Commission's guidance says so in terms.
The limits, before and after 30 September 2026
The Department for Culture, Media and Sport (DCMS) raised several accounting thresholds following a public consultation. The Commission's guidance says the changes came into effect on 30 September 2026 and apply to accounting years that end on or after 30 September 2026.
This is a year-end test. A charity with a year ending 31 December 2026 is under the new limits. A charity with a year ending 31 March 2026 is not, and its accounts for that year follow the old limits.
| Requirement | Year ends before 30 September 2026 | Year ends on or after 30 September 2026 |
|---|---|---|
| Unincorporated charity or CIO can prepare receipts and payments accounts | Income £250,000 or less | Income £500,000 or less |
| Accruals accounts required | Income over £250,000 | Income over £500,000 |
| Independent examination required | Income over £25,000 | Income over £40,000 |
| Independent examiner must be professionally qualified | Income over £250,000 | Income over £500,000 |
| Audit required | Income over £1,000,000, or income over £250,000 and assets over £3,260,000 | Income over £1,500,000, or income over £500,000 and assets over £5,000,000 |
Some thresholds did not move. A registered charity must prepare an annual return and send it to the Commission if its income is over £10,000. It must send its trustees' annual report and accounts to the Commission if its income is over £25,000. ICAEW notes the registration threshold stays at £5,000, and the annual return and annual report thresholds also stay put.
ICAEW says the increase to £500,000 for receipts and payments is meant to let more charities avoid full accruals accounting unless they choose it. It also notes that the £500,000 examiner threshold was chosen to line up with the new SORP Tier 1 limit.
How gross income is measured
Every threshold above turns on gross income for the financial year in question. The Commission tells you to work it out from the charity's accounting records, and it defines the figure differently depending on the basis of accounts.
If you prepare receipts and payments accounts, gross income is the total receipts in the statement of receipts and payments, excluding:
- proceeds from the sale of investments or fixed assets;
- the receipt of any endowment funds; and
- loans received in the year.
If you prepare accruals accounts, gross income is the total income shown in the SOFA for all funds, excluding the receipt of any endowment funds. You must include any endowment that has been transferred to income funds during the year and is now available for spending.
The Commission defines endowment funds as funds received by the charity to be held as capital and used for its purposes. Permanent endowment is property the charity must keep rather than spend. Expendable endowment is a capital fund that allows the trustees to convert it to income.
The practical point is that a one-off loan or the sale of a building does not push a charity over the limit, because those receipts are excluded. A restricted grant does count, because it is income, even though the charity can spend it only on a particular purpose.
A worked example
Take an unincorporated charity with a year ending 31 December 2026. Its statement of receipts and payments shows total receipts of £380,000. Within that figure are a £60,000 loan and £40,000 from selling investments.
- Gross income is £380,000 less £60,000 less £40,000, which is £280,000.
- That is above the old £250,000 limit but well under the new £500,000 limit. Because the year ends after 30 September 2026, the charity can prepare receipts and payments accounts.
- It is over £40,000, so the accounts must be independently examined.
- It is under £500,000, so the examiner does not need to meet the higher professional-qualification requirement described below.
- It is under £1,500,000, so there is no audit requirement, unless its governing document or a funder asks for one.
The same charity with a year ending 30 June 2026 would be under the old limits. Its gross income of £280,000 would be over £250,000, and it would have to prepare accruals accounts.
What receipts and payments accounts must contain
The core is the pair of statements described above: receipts and payments for the year, and a statement of assets and liabilities at the year end. The Commission points charities to a receipts and payments template, and ICAEW reports that DCMS and the Commission have committed to developing a standardised template that charities could choose to adopt.
CIOs have an extra requirement. They must give specific notes to receipts and payments accounts covering:
- any guarantees the CIO has given where a liability may arise at the period end date; and
- any debts secured by a charge on the CIO's assets at the period end date.
The Commission's guidance cites regulation 62 of the Charitable Incorporated Organisations (General) Regulations 2012 for this. If your charity is a trust or unincorporated association, check the Commission's separate guidance for that type of charity for the detail of what goes in the statements and notes.
What accruals accounts involve under the SORP
The Commission's rule is simple: if your charity prepares accruals accounts, you must follow the Charities SORP, the Statement of Recommended Practice. SORP 2026 applies to reporting periods starting on or after 1 January 2026. For accounts covering earlier periods, SORP 2019 applies.
Note the two different dates. The SORP turns on when the period starts. The new thresholds turn on when the year ends. A year running from 1 January to 31 December 2026 is caught by both.
SORP 2026 introduces three tiers, so that the detail you provide fits the size of the charity:
| Tier | Income |
|---|---|
| Tier 1 | Up to £500,000 |
| Tier 2 | Between £500,000 and £15 million |
| Tier 3 | Over £15 million |
The Commission lists the main changes in SORP 2026:
- new accounting rules on income and leases, with practical examples;
- refreshed trustees' annual report requirements, with extra guidance on reporting financial reserves and plans for the future, plus sections on areas of interest to the public and donors such as impact reporting and environmental, social and governance issues;
- simplified accounting and reporting for social investments; and
- easier-to-follow requirements on provisions and contingencies.
A charity that is a registered provider of social housing follows the Housing SORP instead of SORP 2026. The Commission gives that as its example of a sector-specific SORP.
Charitable companies carry a little more. They must prepare an income and expenditure account, which the Commission says can be built into the SOFA, and a directors' report, which can be combined with the trustees' annual report. Medium and large charitable companies must also prepare a strategic report. Charitable companies file with Companies House as well as the Commission.
The trustees' annual report
Trustees of all charities must produce annual accounts, and trustees of all registered charities must also prepare a trustees' annual report. The Commission cites section 162 of the Charities Act 2011 for the annual report requirement.
The amount of information varies. All charities must include the mandatory basic information. The Commission says charities preparing receipts and payments accounts provide less. For charities preparing accruals accounts, the detail depends on the SORP 2026 tier.
How the choice affects scrutiny
The basis of accounts and the level of scrutiny are separate questions, and the thresholds for them sit side by side in the table above.
Independent examination is, in the Commission's words, a less in-depth review than an audit. It is often chosen by smaller charities and focuses on ensuring the accounts match the charity's records. An audit is an in-depth review that gives an opinion on whether the accounts are true and fair.
For years ending on or after 30 September 2026:
- Income of £40,000 or less: no examination or audit is required, unless your governing document or a funding agreement requires one or the other.
- Over £40,000 and up to £1.5 million: you can choose an independent examination or an audit, unless your governing document or a funding agreement requires an audit.
- Over £500,000 and up to £1.5 million: if you choose an independent examination, it must be carried out by a member of a body specified under the Charities Act 2011. The Commission's list includes the Association of Charity Independent Examiners (Fellows), ICAEW, ICAS, Chartered Accountants Ireland, ACCA, AAT, CIMA and CIPFA, among others.
- Over £1.5 million, or over £500,000 with gross assets over £5 million: a full audit by a registered auditor is required. You can search for one on the Register of Statutory Auditors.
The Commission can also require an audit where there may be misconduct or mismanagement, whatever the charity's size.
A charity that is a parent of subsidiaries has further duties. For years ending on or after 30 September 2026, if the group's gross income, after removing transactions between group members, exceeds £1.5 million, the parent must prepare group accounts as accruals accounts to SORP 2026, and they must be audited.
The effect of the changes is large. ICAEW reports the government's estimate that about 2,000 charities will leave mandatory audit, and that about 11,000 charities will no longer need external scrutiny at the new £40,000 examination threshold.
The Commission gives an example of a charitable company with income of £1.1 million in the year to 30 November 2025. It had to be audited. If income for the year to 30 November 2026 is £1.4 million, the trustees can choose an independent examination by a professionally qualified examiner instead.
Records and what you send to the Commission
None of this changes the basic duty to keep proper records. The Commission says all charities must keep financial records such as cash books, invoices, receipts and Gift Aid records for at least 6 years. NCVO's guidance says your records should show and explain all the charity's transactions, show the financial position at any time with reasonable accuracy, and let trustees prepare accounts that comply with the regulations.
NCVO also stresses evidence behind each entry. It suggests keeping a document, real or virtual, for every transaction. For receipts that means things like grant confirmation letters and conditions, invoices for room hire, and signed-off cash sheets from events. For payments it means invoices addressed to the organisation, authorised shop receipts, and expense claim forms with tickets showing the actual cost reimbursed.
A few filing points:
- Registered charities with income over £10,000 file an annual return. Registered charities with income over £25,000 send in the trustees' annual report and accounts.
- All charities must make their accounts available to the public on request, and registered charities must do the same for the trustees' annual report. You may charge to cover your costs.
- The Commission publishes accounts and annual reports on its register for anyone to see. It cannot remove personal data and can redact only in very limited circumstances, so check that any personal information in your accounts is necessary and justified under UK GDPR.
- You can use typed or scanned electronic signatures on balance sheets, accounts, annual reports and the independent examiner's report, unless your governing document says otherwise.
Choosing between the two bases
If you are a charitable company, there is nothing to choose. For an unincorporated charity, trust or CIO under the limit, the Commission leaves the decision with the trustees, and these are the questions to ask:
- Does the governing document say anything? If it requires accruals, that settles it.
- Does a funder require accruals accounts? Check grant conditions before you finalise the basis.
- How close is gross income to £500,000? Remember that gross income is measured on the basis you choose, and receipts and payments leaves out loans and asset sale proceeds. ICAEW advises trustees to review projected income and asset levels for the current year against the new thresholds so they can see their options early.
- Does the charity owe or hold material amounts that cash does not show? Receipts and payments accounts do include a statement of assets and liabilities, but accruals accounts bring money due and money incurred into the year's results. Whether that matters is a judgement for the trustees, ideally with an accountant or the independent examiner.
The Commission's advice is to get professional advice if you need help preparing the accounts or trustees' annual report. That is sensible whenever the charity is near a threshold, is changing basis, or carries endowment funds, loans or secured debts.
One caution on the independent examiner. Whoever you appoint should not be a person involved in running the charity's finances. The examiner's role is to give an independent view, and a person who prepared the accounts or signs the cheques is not independent.
Frequently Asked Questions
What is a receipts and payments account for a charity?
It is a statement of cash received and paid out during the year, together with a statement of the charity's assets and liabilities at the year end. CIOs add notes on guarantees and secured debts.
Can a charitable company prepare receipts and payments accounts?
No. The Charity Commission's guidance says all charitable companies must prepare accruals accounts.
What is the current limit for receipts and payments accounts?
For financial years ending on or after 30 September 2026, an unincorporated charity or CIO can prepare receipts and payments accounts if gross income is £500,000 or less. For years ending before that date the limit is £250,000.
Does my charity need an independent examination?
For years ending on or after 30 September 2026, yes if gross income is over £40,000, unless an audit is required or chosen. At £40,000 or less, none is needed unless your governing document or a funder requires one.
Can we still choose accruals accounts if we are under the limit?
Yes. The limit says when receipts and payments is allowed. The charity can choose accruals, and the governing document or a funder may require it.
Where Deplexify fits
Deplexify's charity accounts and independent examination page sets out what we do for charities in this area.
Sources
- Threshold changes at a glance - GOV.UK — gov.uk, read 2026-10-18
- Changes to charity accounting and reporting - GOV.UK — gov.uk, read 2026-10-18
- Charity accounts - GOV.UK — gov.uk, read 2026-10-18
- Charity accounts: rules for Charitable Incorporated Organisations (CIOs) - GOV.UK — gov.uk, read 2026-10-18
- Charity accounts: rules for charitable companies - GOV.UK — gov.uk, read 2026-10-18
- Record keeping and accounting | NCVO — ncvo.org.uk, read 2026-10-18
- New financial thresholds: effective 30 September 2026 | ICAEW — icaew.com, read 2026-10-18
- Examination of accounts | Resource Centre — resourcecentre.org.uk, read 2026-10-18