Accounting for charities

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Solutions For Charities

Managing a charity comes with unique financial responsibilities—from tracking restricted funds to meeting SORP and regulatory requirements. At Pulse Accountants, we specialise in supporting charities of all sizes with expert, tailored accounting services. Our goal is to lighten your administrative load, ensure full compliance, and provide financial clarity so you can focus on delivering your mission and making a difference.

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Accounting for Charities: Everything You Need to Know

Running a charity isn’t just about doing good—it’s also about staying compliant, transparent, and financially sustainable. Whether you’re managing donor relationships, applying for grants, or preparing for your annual audit, handling the financial side of things can quickly become overwhelming.

With increasing scrutiny from the Charity Commission, rising operational costs, and tighter restrictions around funding, getting your accounting wrong isn’t just inconvenient—it can damage your credibility, impact funding opportunities, and even put your charity at legal risk.

At Pulse Accountants, we understand the unique challenges faced by charities. From compliance with SORP (Statement of Recommended Practice) to navigating VAT complexities and restricted funds, our services specialise in helping charities, and other business types, streamline their finances and focus on their mission.

Whether you're a small community organisation or a national non-profit, this guide will walk you through the essentials of accounting for charities, explain common risks, and show how the right professional support can ensure your charity thrives financially while staying compliant.

 

1. What do accountants for charities do?

Accounting for charities goes beyond standard bookkeeping—it involves managing complex income streams, adhering to charity-specific reporting requirements, and ensuring funds are used in accordance with donors’ wishes and legal obligations.

Unlike commercial businesses, charities must follow Charity Commission guidelines (in England and Wales) and prepare their accounts in line with Charity SORP (FRS 102) if their income exceeds £250,000. This includes the preparation of:

  • A statement of financial activities (SoFA)

  • A balance sheet

  • Notes to the accounts

  • An annual trustees' report

Charities also need to maintain clear records of restricted vs unrestricted funds, handle Gift Aid claims accurately, and produce transparent reports for funders and supporters.

At Pulse Accountants, we provide tailored accounting packages for charities that ensure compliance and deliver clarity—so you can focus on what really matters: making a difference.

 

2. Key accounting tasks for charities

Good financial management is crucial for charitable success. Our team at Pulse Accountants offers comprehensive support for the following charity-specific tasks:

  • Fund Accounting and Reporting
    Charities must manage multiple income sources—often restricted or designated for specific projects. We help track, allocate, and report these funds accurately, ensuring compliance with funder requirements and SORP standards.

  • Gift Aid Management
    Every year, UK charities miss out on millions in unclaimed Gift Aid. We help you register, claim, and track Gift Aid efficiently to maximise every donation.

  • Payroll and Pensions
    Whether you employ a full team or a few part-time staff, we handle payroll processing, auto-enrolment pensions, and HMRC submissions—ensuring full compliance with employment law.

  • VAT Compliance and Advice
    Charities face unique VAT challenges. We help you understand partial exemption, zero-rating rules, and whether your activities require VAT registration.

  • Audit and Independent Examination
    If your income exceeds £25,000, you may need an independent examination—or a full audit if you exceed £1 million. Pulse Accountants can either perform or prepare you for these reviews, ensuring you meet Charity Commission standards.

  • Charity Commission and HMRC Filings
    We ensure timely and accurate filing of your annual returns, accounts, and tax declarations—protecting your charity’s status and reputation.

 

3. Why is thorough accounting important for charities?

Proper accounting ensures your charity maintains public trust, attracts future funding, and complies with regulatory requirements.

  • Transparency Builds Trust
    84% of the UK public say transparency is key to donating. Accurate, clear financial reporting reassures donors their contributions are being used effectively. (Source: CAF Giving Report)

  • Regulatory Compliance
    Charities that fail to submit returns or follow SORP guidance risk fines, deregistration, or public censure from the Charity Commission. Pulse helps you avoid these risks with proactive compliance support.

  • Secure Future Funding
    Grant providers and donors often require detailed financial reports and fund tracking. Well-maintained accounts make your charity more eligible for future grants.

  • Informed Decision-Making
    With robust reports, trustees and management can make strategic decisions about fundraising, service delivery, and sustainability.

Pulse Accountants helps you harness the power of accounting to run a more accountable, effective organisation—with the tools, knowledge, and support you need to thrive.

 

4. Accounting methods for charities

Charities typically use accrual-based accounting due to the complexity of their financial activities. This method records income and expenses when earned or incurred—not when cash is received or paid.

Accrual Accounting (SORP Standard)

Required for charities with an income over £250,000, this method allows for:

  • Clear tracking of restricted/unrestricted funds

  • Accurate grant recognition

  • Better financial planning

Receipts and Payments (For Smaller Charities)

Charities under £250,000 in income may use the simpler receipts and payments basis—ideal for smaller organisations with straightforward transactions.

Not sure which is right for you? Pulse Accountants will assess your needs and ensure your chosen method meets regulatory requirements while supporting your goals.

 

5. Tools and software for charity accounting

Common tools for charity accounting include specialist packages designed to simplify fund tracking, donor reporting, and regulatory compliance. Popular options we work with include:

  • Xero for Nonprofits – Known for its powerful integrations, making multi-fund tracking and donor reporting straightforward.

  • QuickBooks – Ideal for budgeting, managing cash flow, and payroll functions.

  • Sage Accounting – Favoured by larger charities needing detailed departmental breakdowns.

  • Liberty Accounts – A UK-based platform tailored specifically for charities, with built-in Gift Aid and fund reporting features.

At Pulse Accountants, you don’t have to manage your charity’s finances alone. We offer tailored accounting services that include selecting, setting up, and managing the best software solution to suit your charity’s unique needs. With us, you get the best of both worlds: innovative technology to streamline your processes, combined with expert knowledge and insights to keep your accounts compliant with SORP and HMRC requirements.

Let us take the complexity out of your charity accounting, so you can focus on making a difference.

 

6. Tax Obligations for Charities

While charities benefit from tax exemptions, they are not immune to tax obligations. Here's what you need to stay on top of:

  • Gift Aid: Claiming correctly boosts donations by 25%.

  • VAT: Complex rules apply, especially for trading activities and fundraising events.

  • Corporation Tax: Charities must file a tax return if they receive income from non-charitable trading.

  • PAYE and NICs: If you employ staff, PAYE and pensions are required.

  • Trading Subsidiaries: Must be properly structured and taxed separately.

  • Business Rates Relief: Up to 80% mandatory relief for most charities.

We help you manage these obligations and ensure your structure is tax-efficient. With Pulse Accountants, you'll avoid overpaying tax and keep more resources for your mission.

 

7. Common Accounting Challenges for Charities

Running a charity involves navigating a complex financial landscape that can easily overwhelm even the most dedicated teams. From managing restricted funds to meeting strict regulatory deadlines, these challenges can impact your charity’s reputation and effectiveness. At Pulse Accountants, we understand the specific hurdles charities face and are committed to providing tailored support that helps you overcome these obstacles with confidence and ease.

Some of the most common challenges charities face are:

  1. Managing Restricted Funds
    We have helped many charity clients implement robust fund accounting systems that clearly separate restricted funds from general income. At Pulse Accountants, we ensure your accounts comply fully with Charity Commission guidelines, avoiding costly compliance issues and improving financial transparency.

     

  2. Missing Deadlines
    Late submissions can harm your charity’s reputation and attract penalties. Pulse works closely with you to manage all key filing deadlines, including Charity Commission returns and HMRC submissions, so you never miss an important date. Our proactive reminders and expert oversight keep your charity compliant and stress-free.

     

  3. Unclaimed Gift Aid
    With around £560 million in Gift Aid going unclaimed annually (HMRC, 2023), Pulse Accountants supports charities by managing regular Gift Aid claims on your behalf. We help you maximise your income by ensuring no eligible donations are left unclaimed, improving your charity’s cash flow without extra admin.

     

  4. VAT Complexity
    Charities often face challenges with VAT partial exemption and correct classification, which can lead to overpayments. Pulse’s specialist knowledge helps you navigate VAT rules efficiently, identifying potential savings and ensuring compliance, so you pay only what’s necessary.

     

  5. Inadequate Financial Oversight
    Many smaller charities lack the internal capacity to maintain strong financial controls, which can result in errors and audit risks. Pulse Accountants offers tailored outsourced finance services, from bookkeeping to full management accounts and audit preparation, giving you peace of mind and strengthening governance.

At Pulse Accountants, we resolve these challenges with clear systems, ongoing support, and tailored accounting services for charities. Whether you need full outsourced finance or occasional advice, we’re here to help.

 

8. Tips for Better Charity Accounting

Managing the finances of a charity comes with unique challenges, from handling multiple income streams to meeting strict regulatory requirements. At Pulse Accountants, we understand that accurate, transparent accounting is essential not only for compliance but also for building trust with donors and stakeholders. To help your charity maintain strong financial health and confidence, here are some practical tips—backed by our specialist experience—that can simplify your accounting processes and maximise your impact.

  1. Separate Income Streams
    At Pulse Accountants, we use a fund-based chart of accounts to clearly separate restricted, unrestricted, and designated funds—ensuring your grants, donations, and trading income are properly categorised. This makes your financial reports more transparent and aligned with Charity Commission requirements.

     

  2. Claim Gift Aid Regularly
    Pulse helps charities maximise their income by managing Gift Aid claims on a regular schedule—typically quarterly. We handle the paperwork and submissions, so you can boost your income without adding to your admin burden.

     

  3. Use Innovative Software
    We use leading cloud-based accounting software like Xero, QuickBooks, and Sage to provide our charity clients with secure, real-time access to their financial data. Pulse also integrates fund-tracking tools to ensure your records meet funder expectations and audit standards.

     

  4. Regular Trustee Reports
    Pulse prepares clear, accurate financial reports for trustee meetings, helping boards make informed decisions. We tailor each report to your charity’s governance needs—highlighting key figures, variances, and forecasts that support strategic planning.

     

  5. Work With Specialist Accountants
    We are experienced accountants for charities and fully understand the sector’s unique regulatory, reporting, and governance challenges. Pulse Accountants provides expert support with SORP-compliant accounts, independent examinations, and year-end filings, so you can operate confidently and compliantly.

Pulse Accountants supports charities with bespoke services, ensuring your accounts are accurate, up-to-date, and tailored to funders’ expectations.

 

9. Why Outsourced Accounting Is Crucial for Charities

Choosing to outsource your accounting to a specialist firm like Pulse Accountants brings several key benefits:

  • Peace of Mind – We keep you compliant with the Charity Commission and HMRC.

  • Time Saved – Free up resources to focus on your beneficiaries.

  • Increased Funding Success – Clear reports boost credibility with donors and funders.

  • Better Governance – Improve trustee oversight with timely and accurate reports.

  • Expert Advice – From VAT and Gift Aid to fund management and payroll, we handle it all.

Let Pulse Accountants be your financial partner. We offer charity accounting packages that combine cutting-edge software with real, human support from professionals who care about your cause.

Ready to Get Started?

Contact us today to learn more about our accounting packages for charities, how we can help you grow with confidence, and how you can stay compliant while focusing on your mission.

 

  • At Pulse Accountants, our charity-focused services include fund accounting and reporting, Gift Aid management, payroll and pensions, VAT advice, annual accounts preparation (SORP-compliant), independent examinations or audits, and Charity Commission/HMRC filings. We tailor each package to your size and complexity.
  • We set up a dedicated fund-based chart of accounts that clearly segregates restricted, designated and unrestricted funds. This ensures every grant and donation is tracked, allocated correctly and reported in line with Charity Commission requirements.
  • Absolutely. We’ve helped numerous charities prepare their financial statements under SORP (FRS 102) and ensure all notes, SoFA and trustees’ reports meet both Charity Commission and SORP standards, whatever your income level.
  • Yes. We process and submit your Gift Aid claims—quarterly or monthly as preferred—maximising your tax-recovery while minimising administrative burden. Our goal is to ensure you never leave eligible donations unclaimed.
  • We do. If your charity requires a full statutory audit (income over £1 million) or an independent examination (£25,000–£1 million), our qualified team can perform these services or prepare your records for an external examiner, ensuring a smooth and compliant process.
  • Charities face unique VAT challenges—partial exemption, zero-rating and trading-subsidiary rules. We review your activities, advise on registration thresholds, structure any trading arms, and manage your VAT returns to avoid overpayments or compliance issues.
  • We work with your trustees and management team to build realistic budgets and cash-flow forecasts, incorporating grants, donations and trading income. Regular variance analysis keeps you on track and supports strategic decision-making.
  • Pulse implements a proactive compliance calendar, covering Charity Commission returns, HMRC self-assessment or corporation tax filings, payroll submissions and more. We send timely reminders and manage each submission end-to-end.
  • Our fees are bespoke and transparent. After an initial consultation to understand your size, income streams and needs, we provide a fixed-fee proposal covering all agreed services—so you know exactly what to budget.
  • We adopt a collaborative approach: regular calls, on-site or virtual meetings, and tailored management reports. Our aim is to complement your existing skills, strengthen financial oversight, and equip trustees with the data they need to govern effectively.

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