Codec Accounting – plain English accounting for charities, small businesses and sole traders in Ealing, West London and across London.
For financial years ending on or after 30 September 2026, charities with gross income up to £500,000 can prepare simpler receipts and payments accounts. The old limit was £250,000. Charitable companies still need accruals accounts.
Every registered charity in England and Wales prepares annual accounts. There are two types: receipts and payments accounts and accruals accounts. Which one you use depends mainly on your charity's gross income and its legal structure.
This guide explains what each type contains, who can use receipts and payments accounts, and what changed in 2026.
This article covers charities registered with the Charity Commission for England and Wales. Thresholds and rules change from time to time, so check the latest guidance on GOV.UK.
Receipts and payments accounts
Receipts and payments accounts are the simpler option. They record cash in and cash out. They consist of:
A statement of receipts and payments, showing the money that came into and went out of the charity during the financial year.
A statement of assets and liabilities, giving details of what the charity owns and what it owes to other people and organisations at the end of the year.
CIOs must also add notes giving details of any guarantees the CIO has given and any debts secured on its assets at the year end.
The Charity Commission publishes a free receipts and payments template. A volunteer treasurer with tidy bank records can often prepare these accounts.
Accruals accounts
Accruals accounts must give a true and fair view. They record income when the charity is entitled to it and spending when it is incurred, not just when cash moves. They contain:
A statement of financial activities (SoFA), showing all money received or due to the charity and all money spent or incurred in the year.
A balance sheet, showing the charity's financial position at the year end.
Explanatory notes.
To give a true and fair view, accruals accounts follow the Charities SORP (Statement of Recommended Practice). SORP 2026 applies to accounting years starting on or after 1 January 2026. Under SORP 2026, the amount of detail you provide depends on which tier your charity falls into.
Who can prepare receipts and payments accounts?
Unincorporated charities (trusts and associations) and CIOs can choose receipts and payments accounts if their gross income is at or below the threshold:
| Financial year ending | Receipts and payments allowed if gross income is |
|---|---|
| Before 30 September 2026 | £250,000 or less |
| On or after 30 September 2026 | £500,000 or less |
Above those limits, accruals accounts are required. Two other things can rule out receipts and payments:
Your governing document says you must prepare accruals accounts.
A funder requires accruals accounts.
Charitable companies must always prepare accruals accounts, whatever their size.
If your charity has subsidiaries and group income is over £1.5 million, group accounts must be accruals accounts.
Working out gross income
For receipts and payments accounts, gross income is the total receipts for the year, excluding:
proceeds from selling investments or fixed assets
endowment funds received
loans received.
For accruals accounts, it is the total income in the SoFA for all funds, excluding endowment receipts. Expendable endowment transferred to income funds during the year is included.
What the 2026 threshold change means
The receipts and payments limit doubled, from £250,000 to £500,000, for financial years ending on or after 30 September 2026.
The test is applied year by year. The Charity Commission's own example: an unincorporated association with £358,000 income for the year ending 31 January 2026 had to prepare accruals accounts. For the year ending 31 January 2027, with expected income of £437,000, its trustees can choose either type (assuming nothing in its governing document requires accruals accounts).
So a charity with income between £250,000 and £500,000 that has been preparing accruals accounts may now be able to switch, provided its governing document and funders allow it. Earlier years keep the old thresholds. If you are catching up on late accounts, each year follows the rules that applied to it.
Which type suits your charity?
Being allowed to use receipts and payments accounts does not make them the best choice. Trustees can choose accruals accounts at any size.
Receipts and payments accounts tend to suit charities that:
deal mainly in cash and bank transactions
have few bills or income outstanding at the year end
have volunteer treasurers and want simpler records.
Accruals accounts tend to suit charities that:
receive multi-year grants or income for future periods
have significant amounts owed to or by them at the year end
own buildings or equipment, or hold investments
need to show funders a fuller picture of their finances
expect their income to cross the threshold soon.
Switching between the two takes work. Moving to accruals means identifying what was owed and due at the year end and restating figures. Moving to receipts and payments means simplifying records that funders may have come to rely on. Check your governing document and grant agreements before you decide.
Common questions
Do receipts and payments accounts need to follow the SORP?
No. The SORP applies to accruals accounts.
Does the type of accounts change whether we need an independent examination?
No. Independent examination and audit depend on income and assets, not on the type of accounts. For financial years ending on or after 30 September 2026, you need an independent examination if gross income is over £40,000 (earlier years: over £25,000), unless an audit applies. Your governing document or a funder can also require one.
We are a CIO with £60,000 income. Which can we use?
Either, unless your governing document or a funder says otherwise.
We are a small charitable company. Can we use receipts and payments?
No. All charitable companies prepare accruals accounts.
How Codec Accounting can help
We cover all areas of accounting, but we have deeper skills and experience with charities. We work with charities across Ealing, West London and London, as well as remotely across the UK. We can:
Check which type of accounts your charity can prepare, year by year.
Prepare receipts and payments accounts or SORP 2026 accruals accounts, ready for your trustees and your independent examiner or auditor.
Handle a switch between the two, including the year-end figures you need.
Set up simple cloud bookkeeping that fits the type of accounts you prepare.
Pick the type of accounts that serves your trustees and funders. The cheapest option this year can cost more later.
Use our free charity accounts type checker to see which type of accounts your charity can prepare.
This article is general guidance, not advice for your specific situation. Requirements change, so check current guidance on GOV.UK.