Charity & Non-Profit Accounting: What to Look For
Charity accounting follows different rules from commercial accounting. Charities must prepare accounts under the Charities SORP (Statement of Recommended Practice), report to the Charity Commission, manage restricted and unrestricted funds separately, handle Gift Aid claims, and comply with trustee reporting obligations. A charity accountant understands fund accounting, the distinction between restricted and unrestricted income, the specific VAT rules that apply to charities (including partial exemption), the Gift Aid small donations scheme, and the governance reporting that regulators expect. For CICs and social enterprises, the rules differ again, and an experienced advisor can help navigate the right legal structure.
General guidance reviewed 12 July 2026 · How we review content
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Charity & Non-Profit FAQs
Do charities need to be audited?
Charities with income over £1 million, or income over £250,000 and assets over £3.26 million, must have a full statutory audit. Smaller charities may need an independent examination instead. Very small charities (income under £25,000) have the lightest reporting requirements.
What is the difference between restricted and unrestricted funds?
Restricted funds can only be used for the specific purpose stated by the donor. Unrestricted funds (also called general funds) can be used for any purpose that furthers the charity's objectives. Designated funds are unrestricted funds that trustees have earmarked for a particular purpose but could redirect if needed.
How does Gift Aid work for charities?
Gift Aid allows charities to claim an extra 25p for every £1 donated by a UK taxpayer who has completed a Gift Aid declaration. The charity claims the basic-rate tax back from HMRC. Higher-rate taxpayers can also claim additional relief through their Self Assessment return. The Gift Aid Small Donations Scheme allows claims on small cash and contactless donations without declarations.
Choosing an accountant for charity & non-profit needs?
Use the checks in this guide, browse public-record listings, and confirm relevant experience directly before appointing a firm.