Consultation on financial thresholds in Charity Law

On 31 October 2025 the Department for Culture, Media and Sport (DCMS) published its response to the consultation on financial thresholds in charity law, concluding a review that was prompted by the Law Commission’s 2017 report Technical Issues in Charity Law.

This review, the first in a decade, sought to ensure that thresholds remain proportionate and fit for purpose, balancing regulatory oversight with minimising unnecessary burdens on charities.

Charity law establishes financial thresholds that determine regulatory requirements such as registration, reporting, and audit obligations. These thresholds aim to maintain public trust and confidence while recognising that smaller charities lack the resources to manage complex compliance processes. The Law Commission recommended periodic reviews to align thresholds with inflation, and the government committed to conducting such reviews at least every ten years.

Consultation overview:

The consultation, which ran from 3 April to 12 June 2025, invited views on whether thresholds should:

Remain unchanged,
Increase in line with inflation, or
Partially increase by 20%.

Price Bailey was among 137 respondents, including charities, audit firms, and sector bodies.

Notable results of the consultation are as follows:

Thresholds retained at current levels

Charity registration:

The income threshold for mandatory registration remains at £5,000. Raising this threshold to £10,000, as some respondents suggested, would have exempted approximately 17,000 charities from registration, significantly reducing regulatory oversight. The government concluded that such a change would undermine transparency and require costly system upgrades.

Annual return and reporting:

The thresholds for completing an annual return (£10,000) and submitting annual reports and accounts (£25,000) remain unchanged. This decision reflects concerns about maintaining accountability and avoiding complexity for the Charity Commission.

Audit and Independent Examination

Audit threshold:

The most significant change is the increase in the audit threshold from £1 million to £1.5 million in annual income. This adjustment is expected to relieve around 2,000 charities from the cost of a full audit, reducing administrative burdens while maintaining appropriate scrutiny for larger organisations.

Asset-based audit trigger:

Where gross income falls below the audit threshold, the asset threshold requiring an audit rises from £3.26 million to £5 million.

Independent Examination:

While the audit threshold increases, the government opted not to make substantial changes to independent examination thresholds, ensuring continued professional oversight for mid-sized charities.

Fundraising regulations

The remuneration threshold for defining a “professional fundraiser” will rise in line with inflation—from £10 per day or £1,000 per year to £15 per day or £1,500 per year. This change aims to reflect current economic realities and maintain fairness for lower-paid collectors.

Other provisions

Thresholds introduced by the Charities Act 2022, including those relating to small ex-gratia payments, cy-près applications, and permanent endowment restrictions, remain unchanged.

Gift Aid thresholds were outside the scope of this consultation.

The consultation results reflect a cautious approach by the DCMS, prioritising stability and proportionality although the new thresholds unfortunately are not aligned to the recent changes to reporting requirements under the Statement of Recommended Practice (SORP) so there is much to digest when it comes to understanding your reporting requirements!

This increase in the audit threshold represents a sensible compromise, easing financial pressures while maintaining confidence for funders and donors – a change Price Bailey welcomes. However, some respondents expressed concern that higher limits could reduce scrutiny for charities managing substantial funds.

Practical implications

Smaller charities will not see immediate relief from reporting obligations, as thresholds remain unchanged for registration with the Charity Commission.
Mid-sized charities with income between £1 million and £1.5 million will benefit from reduced audit costs, though independent examination requirements still apply.
Fundraising organisations must adjust remuneration practices to comply with updated thresholds for professional fundraisers.

Looking forwards

The Government reaffirmed its commitment to reviewing thresholds at least every ten years, with flexibility for earlier reviews if economic conditions warrant. It also acknowledged sector concerns about complexity and indicated that future consultations may explore opportunities for greater alignment between charity law thresholds and reporting requirements under the Statement of Recommended Practice (SORP).

In summary, the government’s response reflects a measured approach—prioritising proportionality, maintaining public trust, and reducing unnecessary burdens where possible. While the sector may have hoped for broader reforms, these changes mark a step towards modernising charity regulation without compromising accountability.

If you are unsure how these changes affect your organisation or would like further information, please get in contact with us.

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We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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