Does a small charity have to have a reserves policy?

England and Wales: This page sets out the position in full. Scotland: the same split, and OSCR lists the reserves disclosure as a legal requirement for both receipts-and-payments and fully accrued accounts — small Scottish charities are not excused either. Northern Ireland: the same split again, stated by CCNI in its own words — the disclosure duty is framed as applying to even the smallest registered charities, and the policy itself as something that “will help you”.

Does the law require a reserves policy?

No: the law requires the reserves policy disclosure, not the policy. A reserves policy sets out how the trustees decide what level of reserves the charity should hold. This page is for trustees in England and Wales, where the Charity Commission’s CC19 applies. It also covers Scotland and Northern Ireland.

It follows the financial controls policy in this hub; the reserves figure itself comes from calculate your free reserves.

Almost every sector checklist puts a reserves policy in the “required” column. The provision it points at does not say that. The Charities (Accounts and Reports) Regulations 2008 require the trustees’ annual report to contain, verbatim:

“a description of the policies (if any) which have been adopted by the charity trustees for the purpose of determining the level of reserves … and where no such policies have been adopted, a statement to that effect”

Read the two halves. “(if any)” concedes that a charity may have no policy. The closing clause tells you what to do when it does not. That is a duty to disclose, and it is the part that carries legal force: Charities (Accounts and Reports) Regulations 2008 reg 40(3)(p) — the trustees' annual report MUST state the reserves policy, or state that there is none.

The policy itself sits one step lower. The Charity Commission expects trustees to decide, publish, implement and monitor a reserves policy. CC19 puts that as a should. It is good practice the regulator will judge you against, not a duty.

The Commission’s own must attaches to the reporting, not to the holding. So the honest answer to the title question has two parts. No, you do not have to have one. Yes, you have to write something either way.

Are small charities excused the reserves disclosure?

No. The reserves disclosure applies to non-auditable charities too, unlike two similar requirements.

This is the part that catches people who have learnt, correctly, that most annual report content is for audited charities only. The reserves disclosure is not. Regulation 40(7) lists the sub-paragraphs that non-auditable charities are excused from. Paragraph (3)(p) is missing from that list.

Two nearby requirements work differently, in two different ways:

• The investment narrative at reg 40(3)(o) IS excused for non-auditable charities. Reg 40(7) names it.
• The risk statement (see build your risk register) is limited to auditable charities by the structure of reg 40(2)(b) itself. That regulation splits a non-auditable limb from an auditable one. It puts the risk statement in the second. Regulation 40(7) does not mention it at all.
• The reserves disclosure is excused by neither. It applies at every size.

Three requirements that look alike on a checklist, three different scopes, two different ways of excluding. If you have been told “the small-charity exemptions cover this”, check which mechanism was meant.

What to write if you have no reserves policy

A charity with no reserves policy still has to say so in its annual report. Some charities have good reason to hold nothing back.

Take a grant-funded project charity that spends what it receives, in the year it receives it. It may have no meaningful free reserves and no sensible policy to state about them. That is a position you can defend. It is not a reason to leave the annual report silent.

The regulation asks for a statement to that effect. One or two sentences do it. Say that the trustees have considered reserves, that they have not adopted a policy, and why. Writing down the reasoning is what turns “we never got round to it” into a decision the board can stand behind if anyone asks.

Three pages in this guide touch this subject. They do three different jobs. This one answers whether the document is required.

Money and accounting — Write your reserves policy answers what a policy should say and how much to hold. Reporting and compliance — Draft the financial review and reconcile your reserves figure answers what goes in the annual report and how the figure has to reconcile. Do not look for the number here. This page does not give it.

The annual return’s reserves question

The Commission’s annual return asks whether each of 13 named policies and procedures was in place at the end of the period. Reserves is one of them. It is also one of the 6 that the Commission’s own guidance says it expects most charities to have.

Being asked on a form is not the same as being required by law. Being expected by the regulator is a third thing again. But on reserves all three point the same way. That is why this row is the one most likely to be taken as a general rule when it is not.

The rest of the form is on what the annual return asks.

Scotland and Northern Ireland: the same split

OSCR lists the reserves disclosure as a legal requirement for both receipts-and-payments and fully accrued accounts. So small Scottish charities are not exempt from the disclosure duty either. One caveat: that listing was not re-checked during the 19 August 2026 verification pass. That pass corrected the England and Wales position set out here. Treat it as current but unrefreshed.

Northern Ireland was read in full and says the same thing in its own words. CCNI, verbatim:

“By law, even the smallest registered charities have to review their work and their finances at the end of their financial year and report on their financial position in their trustees’ annual report. You should include the information about whether your charity does or doesn’t hold reserves, and why you have made that decision.”

On the policy itself, CCNI’s framing is the good-practice one throughout. A reserves policy is something that “will help you” identify your financial position, your income sources and your main financial risks. It is never a must. Two regulators, working apart, split the same subject the same way. That is worth more than either statement alone.

Reading the regulation yourself on legislation.gov.uk

If you check reg 40 for yourself on legislation.gov.uk, two things will confuse you. Neither is your mistake.

The site has no revised version of the 2008 Regulations. The revised URL redirects to the as-made text. Eleven separate effects are listed against the instrument. All are shown as not yet applied. None of them touches reg 40, so the as-made text is the operative text.

And reg 40 as made refers to “section 45(1) of the 1993 Act”. That Act was repealed on consolidation. Under the consolidation savings, the reference is read as Charities Act 2011 s.162.

A reader sent to the raw provision will find a repealed statute on its face. They will reasonably conclude the whole thing is out of date. It is not.

Common mistake: reading reg 40(3)(p) as a duty to have a policy

CC19 and the annual return both use must around reserves, and the word gets attached to the wrong noun. The provision requires the annual report to describe the policy “(if any)” and, where none has been adopted, to state that. “You must have a reserves policy” is not what it says. “You must state your reserves policy, or state that you have none” is.

Common mistake: assuming reserves policies are only for larger charities

A reasonable assumption, because most annual report requirements are limited to audited charities. This one is not. Regulation 40(7) excuses a named list of sub-paragraphs. The reserves disclosure is not among them, so it applies at every size.

Common mistake: having no policy and saying nothing

If there is no policy, there seems to be nothing to report. The regulation says otherwise: it requires a statement to that effect. The absence of a policy is not the breach. The silence about it is.

Worked example

Tollgate Youth CIO is below the audit threshold. It has never set a reserves policy. Its trustees’ annual report says nothing about reserves at all. The trustees assume that a charity of their size is outside this requirement, as they are outside several others.

They are in breach. That is not because they have no policy. It is because the report is silent.

Two routes out are equally valid. They can adopt a policy and describe it. Or they can minute a decision that no policy suits a charity funded the way theirs is. Then they state that in the report. What they cannot do is leave the section empty.

With reserves settled, the next policy in the sequence is the data protection policy.