This article is part of a suite of charity law updates on the Autumn 2026 Charity Commission guidance. 

The Charity Commission updated its reserves guidance (CC19) in September 2026, raising expectations on the quality and specificity of reserves reporting. Boilerplate policy statements are no longer acceptable. This section explains what must be disclosed, what trustees are expected to do, and the key actions to take now.

What's changed?

The CC19 was updated on 16 September 2026. The core legal framework is unchanged, but the guidance sharpens expectations around quality of reporting, the rationale behind reserves policies and the treatment of designated funds. 

The Commission is explicitly signalling that boilerplate reserves policy statements will not be regarded as satisfactory.

The definition of reserves - what counts and what doesn’t

Reserves are that part of a charity's unrestricted funds that is freely available to spend on any of its purposes. 

Items excluded from the definition include: 

• Tangible fixed assets used to carry out the charity's activities (such as land and buildings). 
• Permanent endowment capital.
• Social investments.
• Designated funds set aside to meet essential future spending.
• Commitments not yet provided for as a liability in the accounts. Restricted funds also fall outside the definition.

What must be disclosed

All charities must include in their annual report their policy on reserves, stating the level of reserves held and why they are held. Where the charity does not have a reserves policy, it should include a statement to that effect. 

Where material funds have been designated, the reserves policy statement should quantify and explain the purposes of those designations and, where set aside for future expenditure, the likely timing of the expenditure. 

A greater degree of public accountability reporting is expected of charities with income of £500,000 or more. 

The Commission's expectations of trustees

The Commission expects trustees to decide, publish, implement and monitor their charity's reserves policy. 

Trustees should develop a policy that fully justifies and clearly explains keeping or not keeping reserves; identifies and plans for the maintenance of essential services for beneficiaries; reflects the risks of unplanned closure; and helps to address the impact of unplanned closure on beneficiaries (particularly vulnerable beneficiaries), staff and volunteers. The policy should be published and tailored to the charity's circumstances - not a standard form of wording.

Holding too much or too little

A charity can attract scrutiny if its reserves appear too high either because trustees haven't fully explained the reasons, or because they're having difficulty using their funds. If a charity ultimately has more resources than it needs to fulfil all of its purposes, the trustees must consider whether the charity's purposes should be amended to enable it to operate more effectively.

Having no reserves creates financial risk from unforeseen expenditure, income shortfalls or an inability to control costs. Trustees choosing a 'zero level' reserves policy should consider the financial and other risks inherent in such a policy and must explain it in the trustees' annual report.

A caution on designated funds

Designations relate to future plans that exist at a point in time. No new designations can be set up retrospectively after the year end to disguise the true level of unrestricted funds held in reserve. 

Designations that are never used, or frequently changed without funds being spent, risk bringing the charity into disrepute with donors and financial supporters. If a complaint is made to the Commission, the inappropriate use of designated funds may attract regulatory attention.

Simple approach for smaller charities

The guidance sets out a simple three-question approach to help trustees of smaller charities develop their reserves policy: 

1. Does your charity need to keep reserves? 
2. How much do you need in reserve? 
3. Have you got any funds in reserve at the end of the year? 

Information about the reserves policy and the level of reserves held must be included in the trustees' annual report. 

More complex charities

For charities with more complex activities and structures, the guidance sets out an integrated six-step approach: 

• Step 1: Understanding the nature of charitable funds held. 
• Step 2: Identifying functional assets. 
• Step 3: Understanding the financial impact of risk. 
• Step 4: Reviewing sources of income. 
• Step 5: Impact of future plans and commitments. 
• Step 6: Agreeing a reserves policy. 

Key action points

• Review your reserves policy now. Does it contain a genuine, tailored explanation or does it read as boilerplate?
• Ensure the reserves statement in your annual report quantifies your reserves clearly and explains why that level is appropriate for your charity's specific circumstances.
• If you have designated funds, check that they represent genuine future plans and that they are being used as described. Do not create retrospective designations after the year end.
• If your reserves appear very high or very low, consider whether your current policy adequately justifies the position and take advice if needed.
• Remember that the level of reserves must be actively monitored throughout the year, not just reviewed at year-end. Trustees should keep their reserves policy and the level of reserves held under review throughout the year as part of normal monitoring and budgetary reporting processes.