Choosing Charity Accounting Software

No law says a charity must use charity-specific accounting software. What the law does say is that your accounts have to separate restricted funds from unrestricted ones, follow the format your income band requires, and stand up to an independent examination. Ordinary small-business bookkeeping software does none of those three things out of the box.

That is the whole decision, really. You are not choosing between "charity software" and "normal software" — you are choosing whether the fund accounting, the reporting format, and the Gift Aid claim happen inside the system or in a spreadsheet alongside it. Both are legitimate answers for a small charity. This guide sets out the criteria that decide which one you need.

1. Fund accounting — the one thing that is not optional

Charity accounts must show restricted and unrestricted funds separately. Restricted funds are money given for a specific purpose; unrestricted funds can be spent at the trustees' discretion on any of the charity's objects. A grant for a youth project cannot quietly subsidise the electricity bill, and your accounts have to demonstrate that it did not.

General bookkeeping software has no concept of a fund. People work around this with tracking categories, class codes, or a second spreadsheet — and that works, up to a point. The point it stops working is usually when you hold more than three or four restricted pots at once, or when a fund runs across two financial years.

Ask any product you are assessing to show you a fund balance report: opening balance, income, expenditure, closing balance, per fund. If the answer involves exporting to a spreadsheet, you are still doing fund accounting manually.

2. The reporting format your income band actually requires

This is where charities most often over-buy. The format you need depends on income, not ambition.

Under section 133 of the Charities Act 2011, as amended, "If a charity's gross income in any financial year does not exceed £500,000 the charity trustees may, in respect of that year, elect to prepare— (a) a receipts and payments account, and (b) a statement of assets and liabilities, instead of a statement of accounts under section 132(1)."

Until recently that figure was £250,000, and the detail of when the change bites matters more than it looks. The Charities Acts 1992 and 2011 (Substitution of Sums) Order 2026 substituted £500,000 for £250,000 in section 133 and came into force on 30 September 2026 — but the switch is keyed to your year end, not to the calendar. Article 5(6) of the Order provides that the substitutions "do not apply in relation to any financial year of a charity ending before 30th September 2026."

So a charity with a 31 March 2026 year end preparing its accounts in the autumn is still on the £250,000 threshold, because that financial year ended before the cut-off. A charity with a 31 December 2026 year end is on £500,000. The same is true of the audit and examination thresholds in sections 144 and 145 — all of them turn on the year end, not on the date you sit down to do the accounts.

If you are eligible for receipts and payments and intend to use them, you do not need accruals-capable, SORP-formatted software. You need a clean cash record, a fund split, and a way to produce a statement of assets and liabilities. That is a much smaller purchase.

If you prepare accruals accounts, you need the software to produce them in the format the Charities SORP requires. Note the edition: "The Charities SORP and SORP 2026 will apply to accounting periods starting on or after 1 January 2026." Ask whether the product has been updated for it, and be specific — ask which module set it implements, not whether it is "SORP compliant."

Our free SORP tier calculator will tell you which tier applies to your income, and the charity accounts guide covers what each format has to contain.

3. Whether your examiner can get at the numbers

Most small charities need an independent examination rather than an audit. Section 145 of the Charities Act 2011, as amended, requires examination or audit once "its gross income in that year exceeds £40,000" — the figure the same Order substituted for £25,000, on the same year-end basis described above, so a financial year ending before 30 September 2026 still needs examination once income exceeds £25,000.

The practical question is what your examiner has to do to review your figures. A read-only login is the cleanest answer. A pile of PDF exports is workable. A proprietary file format that only opens in a paid desktop licence your examiner does not own is a genuine cost — they will bill you for the time.

Ask before you buy: can I give my independent examiner read access, and does that cost extra per user? See our independent examination guide for what the examiner will be looking at.

4. Gift Aid, and whether it is really automated

Gift Aid is the feature most often oversold. "Gift Aid support" can mean anything from a full claim submission through HMRC's API down to a button that exports a spreadsheet in roughly the right shape.

Three questions separate them:

• Does it store the declaration itself, with the date and the donor's address, or only a yes/no flag?
• Does it submit to HMRC directly, or produce a file you upload?
• Does it handle the Small Donations Scheme, where there is no declaration to attach?

If your charity claims a few hundred pounds a year from a handful of regular donors, a manual claim takes an afternoon and automation is not worth paying for. If you run collections and events, it changes the arithmetic. Our Gift Aid claim guide sets out what the manual process actually involves, which is the right baseline for judging whether automation earns its cost.

5. Who is going to use it

Most small charity finances are run by a volunteer treasurer who has an evening a week and may or may not have an accounts background. That is the binding constraint, and it is routinely ignored during software selection because the person running the demo is usually the most financially confident trustee on the board.

Two tests worth applying:

• Time how long it takes an ordinary trustee — not the treasurer — to find the current balance of one restricted fund. If it takes more than a minute, handover to a future treasurer will be painful.
• Ask what happens when the treasurer leaves. Is the subscription in the charity's name with the charity's email, or in the treasurer's? This is a common and entirely avoidable mess. Our charity treasurer role guide covers the handover in more detail.

6. Getting your data back out

Whatever you choose, at some point you will leave it. Before signing up, check you can export the full transaction ledger and the fund balances in a format you can open without the software — CSV at minimum. This matters because the retention duty sits with you, not your supplier: section 131 of the Charities Act 2011 requires trustees to "preserve any accounting records made for the purposes of section 130 in respect of the charity for at least 6 years from the end of the financial year of the charity in which they are made." A charity that cannot extract its own records is relying on a supplier to discharge a duty the law places on its trustees.

7. Cost against income, not against features

Charity accounting products are typically priced in bands, and the higher bands buy multi-entity consolidation, budgeting workflows, and user counts that a small charity does not have. Work out what a year of the subscription represents as a share of your annual income before you look at the feature list — that number decides more than the comparison table does. Check whether the pricing counts trustees as users — if every trustee needs read access to the finance report before each meeting, a per-seat model gets expensive quickly.

A shortlist scorecard

Score each option out of two on the following, and be honest about the ones you are tempted to skip:

1. Produces a per-fund balance report without a spreadsheet
2. Produces accounts in the format your income band requires, for the year end you actually have
3. Gives your independent examiner access at no extra cost
4. Handles Gift Aid to the depth your donation pattern needs
5. Usable by a volunteer with an evening a week
6. Registered to the charity, not to an individual
7. Full CSV export of ledger and fund balances
8. Annual cost under 0.5% of annual income

Anything scoring below 10 out of 16 is probably the wrong size for you in one direction or the other. If you score highly on 1, 5, 6 and 7 and poorly on the rest, a simple cash-based system plus a fund spreadsheet is very likely the right answer, and there is no shame in it — a great many charities under £100,000 run exactly that way.

What matters is that the choice is deliberate. The failure mode is not choosing badly; it is drifting into a system that no longer fits, then discovering it at year end when the examiner asks for a fund breakdown that takes two weekends to reconstruct. Our guide to charity management software covers the wider question of what else a small charity might sensibly put into software, and the compliance checklist generator will show you which reporting obligations apply at your income band.

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This guide covers charities registered in England and Wales. The Charity Commission for Northern Ireland and the Office of the Scottish Charity Regulator have separate accounting regimes. This is general guidance based on the published Acts and statutory instruments — for your charity's specific reporting position, confirm with your independent examiner or auditor.

Sources

• Charities Act 2011, section 133 — receipts and payments accounts
• Charities Act 2011, section 145 — examination or audit of accounts
• The Charities Acts 1992 and 2011 (Substitution of Sums) Order 2026
• SI 2026/427, article 5 — transitional provision
• Charities SORP
• Charities Act 2011, section 131 — preservation of accounting records
• GOV.UK: Claiming Gift Aid as a charity or CASC