Keith Macpherson

The Scottish Government has announced that the statutory audit threshold will rise for the first time in more than 20 years. From now on, charities with income below £1 million may no longer need a full audit.

At the same time, the newly finalised Charities SORP 2026 keeps the Tier 1 reporting threshold at £500,000. This sets the point at which charities can benefit from the most generous reporting exemptions.

The two thresholds no longer align. As a result, trustees of charities with income between £500,000 and £1 million may find themselves free of an audit while still required to meet the same narrative and disclosure requirements as organisations up to £15 million in income.

Keith Macpherson, partner and charity specialist at Henderson Loggie, said the changes are significant for boards across the country.

“Trustees do not need to be accountants, but they do need to be informed guardians of financial stewardship,” he said.

“The new rules create a gap between reporting and scrutiny thresholds, which can cause real confusion. Boards should seek clear briefings from their finance leads and advisers so they understand what these changes mean for their charity.

“The decisions trustees make now will shape public confidence in the years ahead.”

In its consultation response, Henderson Loggie joined others in calling for the SORP-making body to raise the Tier 1 threshold. That recommendation was not taken forward.

The firm is now advising trustees to take practical steps well before the SORP 2026 rules come into force for accounting periods beginning on or after 1 January 2026.

Trustees are encouraged to ask how SORP 2026 will affect year end accounts, especially income recognition and lease accounting. Also, if a charity occupies premises or holds a below market rent lease, they need to understand what the new lease guidance will mean for the balance sheet and disclosures.

For charities with income between £0.5 million and £1 million, there will be implications in shifting from an audit to an independent examination or the reverse and trustees should consider how such a change would affect stakeholders, risk appetite and long- term governance.

These reforms aim to improve clarity and accountability, but many sector leaders believe Scotland has missed the chance for a coordinated review of financial reporting and scrutiny.

Henderson Loggie is urging trustees to act now, request the numbers they need, understand the practical effects of the changes, and record clear governance decisions that reflect their charity’s risk profile and public mission.