For many charities, external scrutiny is a significant annual governance cost. As financial reporting thresholds rise across England and Wales, trustees of some charities can now reconsider whether a statutory audit remains necessary, or whether an independent examination would be a more proportionate choice.
Charities with income between £1 million and £1.5 million are particularly affected, although the thresholds for independent examination have also moved.
In this blog, Johnathan Dight, Director at Bevan Buckland, explains what has changed, how an audit and an independent examination differ, and what trustees should weigh up when choosing between them.
What Has Changed in the Charity Thresholds
Following a consultation, several financial thresholds have been increased, taking effect for accounting periods ending on or after 30 September 2026. These changes apply to charities in England and Wales; Scotland and Northern Ireland have their own separate requirements.
The main changes are:
- The statutory audit threshold increasing from £1 million to £1.5 million gross income.
- The asset threshold linked to audit requirements increasing from £3.26 million to £5 million (where gross income also exceeds £500,000, up from £250,000).
- The independent examination threshold increasing from £25,000 to £40,000 income.
- The threshold requiring a professionally qualified independent examiner increasing from £250,000 to £500,000 income.
The government estimates that these changes will generate annual savings of around £4 million for charities while maintaining appropriate levels of public accountability. The changes recognise a reality that many in the sector have highlighted for years: inflation and increasing compliance costs were drawing smaller charities into audit requirements that no longer reflected their size or risk profile.
Understanding the Difference
It helps to be clear about what each option involves before comparing them.
Audit
An audit provides the highest level of external assurance. Auditors undertake detailed testing of transactions, controls and balances before expressing an opinion on whether the financial statements give a true and fair view.
The benefits include:
- Stronger assurance for trustees.
- Greater confidence for funders, banks and stakeholders.
- More detailed consideration of internal controls and governance.
- Enhanced credibility for larger or more complex charities.
However, audits can be time-consuming and costly, particularly as audit regulation, documentation standards and professional requirements have increased in recent years.
Independent Examination
An independent examination is a lighter-touch review designed specifically for charities that fall below the audit thresholds.
The examiner:
- Reviews the accounts.
- Considers whether accounting records appear adequate.
- Identifies any matters that should be brought to trustees’ attention.
- Reports on whether anything has come to their attention suggesting the accounts should not be accepted.
An independent examination does not provide the same level of assurance as an audit and does not involve the extensive testing associated with audit procedures. It remains an important form of external scrutiny and, in many cases, will provide a sensible balance between accountability and cost.
Is an Audit Always Value for Money?
For charities in the £1 million to £1.5 million range, this is now the main question. A statutory audit may cost several times more than an independent examination. As trustees face increasing pressure on resources, it is reasonable to ask whether those additional costs deliver sufficient benefits. The answer depends on the charity’s circumstances.
An independent examination may suit a charity that:
- Has simple operations.
- Has a stable funding base.
- Has strong internal financial controls.
- Is not required by funders, lenders or governing documents to have an audit.
Any savings could be redirected towards frontline charitable activities, staff, fundraising or service delivery.
When an Audit Still Makes Sense
Audits continue to matter for larger, more complex organisations, where the extra assurance delivers real value. The new thresholds do not mean charities should automatically abandon them.
Trustees should carefully consider whether an audit continues to add value where:
- Significant public funds are involved.
- Additional governance assurance would support trustee oversight.
- The charity operates multiple locations.
- Complex grants, contracts or trading activities exist.
- There are concerns over governance or internal controls.
- Funders expect audited accounts.
- Borrowing arrangements require audited financial statements.
In these circumstances, the benefits of an audit may extend well beyond regulatory compliance.
The Governance Perspective
Trustees have a duty to act in the best interests of their charity and to ensure resources are used effectively. That raises a question for the board:
Is spending £10,000, £15,000 or more on an audit providing meaningful additional assurance, or would a lower-cost independent examination achieve the appropriate level of external scrutiny?
There is no universal answer. Some trustees may conclude that maintaining an audit demonstrates a commitment to transparency and provides comfort to stakeholders. Others may decide that the money could have greater impact if invested directly into charitable objectives. What matters is that the decision is considered, documented and based on the charity’s individual risks and stakeholder expectations.
Where to Start
A practical first step is to check your governing document and any funding or loan agreements, because these may require an audit, depending on the thresholds. Then compare what an audit and an independent examination would each cost and provide for your charity, and record the trustees’ decision, with the reasons for it, in the minutes.
How We Can Help
If your charity is near the new thresholds, our charity team can compare what an audit and an independent examination would each involve for you, taking into account what your funders and governing document require. We can also help trustees reach and record their decision. Email mail@bevanbuckland.co.uk, or call 01792 410100 and ask for Johnathan.
