Charities and social enterprise legal update: Summer 2026

We are very happy to provide our charity law update below, which will bring you up to speed on relevant legal developments since our update at the start of the year.

We will be in touch again in the Autumn with a further legal update. Alongside this, in September our team will be running a series of training webinars for trustees and staff, covering the latest issues, in conjunction with HaysMac specialist accounts.

We encourage you to sign up to these sessions here.

If you need any legal help or would like to discuss any queries in the meantime, we would be delighted to hear from you.

Stephen O'Reilly

Head of charities and social enterprise
s.oreilly@hempsons.co.uk

Martyn Robinson

Associate
m.robinson@hempsons.co.uk

Threshold for auditing charity accounts increased

Certain financial thresholds relevant to charities have been subject to review and will be changing later in the year.

These include the threshold above which a registered charity is required to have its annual accounts audited. At present, this requirement applies if a charity’s gross income exceeds £1m in a given financial year. This is increasing to £1.5m from 30 September 2026..

The audit requirement also currently applies if a charity’s gross income is more than £250,000 and the aggregate value of its assets is more than £3.26m. These thresholds are increasing to £500,000 and £5m respectively from 30 September 2026.

Action point: Trustees should review the position of their own charity and whether it will be subject to an audit under the higher threshold. The changes are likely to mean that fewer charities will be subject to the audit requirement going forward.

Fundraising Regulator looks at quality of reporting by charities on fundraising activities

In late January 2026, the Fundraising Regulator (“FR”) reported on compliance by charities with the obligations contained at section 162A of the Charities Act 2011. The report is available here.

This section provides (broadly) that where a charity is required to have its accounts audited, the charity trustees must include certain statements relating to their fundraising activities in their annual report.

The FR looked at the accounts of 236 charities, and found a mixed picture. Compliance with the law was better among charities that pay the FR’s voluntary levy. Weaker areas included reporting on fundraising carried out by third parties, and on the measures taken to protect vulnerable people.

Action point: Trustees of charities that are subject to an audit (discussed above) need to be aware of this legal requirement and ensure compliant reporting in the annual report.

Charity reporting in 2026: beyond compliance

Laura Masheder, head of the charity and not-for-profit team at BHP accountants, has contributed a timely article looking at the new SORP 2026, the framework for preparing charity accounts. The article looks at:

the introduction of a three-tier reporting framework (depending on a charity’s income level);
changes to income recognition and lease accounting, and the impact on reporting for charities;
managing the narrative by using the trustees’ annual report.

Action point: The new SORP applies for accounting periods beginning on or after 1 January 2026, so all trustees need to be aware of these changes.

Please see Laura’s article here.

New enforcement powers for the Charity Commission proposed

In March 2026, the Department for Culture, Media and Sport (DCMS) published a press release outlining planned new powers for the Charity Commission (available here).

The proposal is reported to involve “powers to close down charities that promote extremism” with an emphasis on swifter action.

It is not clear yet how such powers will be introduced, and whether primary legislation is required.

The press release also mentions that mandatory trustee ID verification is being considered for charity trustees – a measure introduced last year in relation to company directors.

Action point: Trustees should monitor the introduction of these new powers, and any further details on possible ID verification for charity trustees.

Appeal against the introduction of VAT on private school fees dismissed

In March 2026, the Court of Appeal dismissed appeals brought against the introduction of VAT on private school fees, which had previously been dismissed by the High Court.

The appeals had been lodged by members of the Charedi Orthodox Jewish community and a number of Evangelical Christian schools, which provide specialist religious education.

The Court of Appeal carried out an assessment, and ruled that the government had provided objective and reasonable justification for its position (in particular in not having an exemption for low-cost private schools).

Action point: Trustees of charities in the fee-paying education sector will want to monitor the continuation of this appeal, which is now expected to go to the Supreme Court

Trustee not entitled to whistleblower protection – not viewed as worker

The employment tribunal has held that a charity trustee was not entitled to statutory whisteblower protection under the Employment Rights Act 1996 based on their status as a charity trustee.

A previous consideration of the matter by the employment appeal tribunal had indicated that such protections might be extended to charity trustees, raising questions about whether other workers’ rights might apply to trustees.

Instead, this decision has established that these whistleblowing protections apply to workers only, which would not include charity trustees. The topic may yet come up again, as the decision is not generally binding, but seems to settle the question for the time being.

Case: MacLennan v British Psychological Society (Secretary of State for Business and Trade and Charity Commission intervening) ET/2602281/2021

Action point: Trustees appear to be more clearly classed as volunteers, and not workers, under this ruling, but boards should continue to monitor legal developments in this area.

Appeal against waiver for automatic disqualification of trustee dismissed

A recent case in the first-tier tribunal looked at an individual with convictions for serious sexual offences, who sought a waiver from the Charity Commission from being automatically disqualified from acting as a charity trustee.

In this case, the disqualified individual sought a waiver in relation to a specific charity but also a particular class of charities, being “penal reform charities”.

This was only the second time the tribunal has had to consider such an appeal, and it dismissed the appeal in this case. The tribunal made interesting comments on how disqualified individuals might otherwise support and engage with a charity (in the capacity of a non-trustee).

Case: Brown v Charity Commission for England and Wales[2026] UKFTT 460 (GRC)

Action point: Trustees of any charities that are considering seeking a waiver for a disqualified individual should review the tribunal’s decision, which contains helpful commentary on the process.

The Mental Health Act 2025 and its impact on the social care sector

The passing of the Mental Health Act 2025 will have various implications for social care providers, who will need to adapt their practices accordingly, enhance staff training, and ensure robust collaboration with mental health services.

For more information on this legal development, please see this article published by our Healthcare Regulatory team.

Action point: Trustees of charities involved in social care will want to be aware of these developments, and monitor the ongoing practical impact.

You can find out more about our work in the charities and social enterprise sector and get in touch with Stephen and Martyn on our website.

If you need any legal help, have any questions, or would like to discuss any of the issues covered in this update, we would be delighted to hear from you.

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