The Department for Culture, Media and Sport (DCMS) has launched a consultation to review financial thresholds within the Charities Act 2011. A key part of the review is whether to raise the mandatory audit threshold for charities in England and Wales from £1 million to £1.5 million. This follows the Scottish Government’s decision in 2024 to increase its threshold from £500,000 to £1 million.
What’s being proposed?
Currently, charities with an income over £1 million (or £250,000 if assets exceed £3.26 million) are required by law to have a full statutory audit. The proposal under consultation would raise this income threshold to £1.5 million. It reflects inflation, economic pressures, and the desire to reduce the administrative and financial burden on smaller charities.
What does this mean for charities?
- Less red tape: Fewer charities would be legally required to undergo an audit, potentially reducing the time spent on regulatory compliance.
- Cost savings: An audit can cost thousands of pounds. Removing the obligation could free up funds for frontline services.
- More flexibility: Charities below the threshold could opt for an independent examination instead—a less intensive and less costly process.
Are there any drawbacks?
While fewer audits may reduce costs, it’s not without drawbacks:
- Reduced assurance: Audits provide a high level of scrutiny and confidence. Without them, trustees, donors, and funders may have less visibility over financial health and governance.
- Perception matters: Some stakeholders, especially major funders, may still expect audited accounts, regardless of legal thresholds.
- Internal governance: Audits can highlight internal issues or risks that may otherwise go unnoticed in an independent examination.
Our view as charity sector specialists
We support a proportionate approach to regulation—charities should not be overburdened with compliance costs. However, audits do provide a level of accountability that can be valuable, even for smaller organisations. The decision to opt out (if eligible) should be made carefully, considering stakeholder expectations, risk appetite, and the organisation’s long-term plans.
What should charities do now?
The consultation is open until 12 June 2025, and we encourage charity leaders and trustees to respond. It’s important the sector’s voice is heard in shaping a regulatory environment that balances trust, transparency, and sustainability.
If you’re unsure how these changes might affect your charity, or whether an audit remains the right choice for you, our team is happy to offer tailored advice. Contact PM+M charity specialist and partner, Ceri Dixon, by clicking the button below.
