The gap between income and expenditure across the charity sector shrank in 2023 to its lowest level in five years as spending grew by 9.6%, new figures show.
Charities’ total gross expenditure reached £95.7bn as a result of the rise, while total gross income was £96.4bn, an increase of 6.8%, analysis of annual returns by the Charity Commission reveals.
“This reflects further broadening and deepening of the positive societal impact of charities, as they expend increased resources to deliver their charitable aims,” the report said.
However, it went on to warn that the trend showed “an ongoing downturn in operational sustainability for some charities”, with almost half (43%) reporting outgoings that exceeded their income for the 2023 calendar year.
Across the charity sector, the £700m gap between income and expenditure was far smaller than it has been in recent years.
In 2022, the gap was £3bn, and across the previous four year-ends it averaged £2.87bn, peaking at £3.3bn in 2021.
“Our data shows the cost-of-living crisis has applied significant pressure on charity finances – with the narrowest gap between income and expenditure in recent years,” said David Holdsworth, the commission’s chief executive.
“But it also shows charities rising to the challenge, spending almost 10% more in 2023 than in 2022 to meet increased need.”
Small charities financially squeezed
Small charities with an annual income below £100,000, which make up 62% of those registered, faced the biggest financial challenges, according to the analysis.
Organisations in this income band collectively received £2bn (2.1% of sector income) in 2023 but spent £2.3bn (2.5% of expenditure).
By contrast, charities with an income above £500,000 received £88.8bn (92.1% of sector income) while spending £87.7bn (91.6% of expenditure).
The research also asked charities with incomes above £500,000 about their reserves, which remained at the same level – £75bn – as in 2022, up slightly from £73bn in 2021.
These larger charities were more likely to gain most of their income – typically 40 to 50% – from charitable activities. For the largest charities with incomes of more than £5m, that figure rose to 52.3%.
By contrast, organisations taking less than £500,000 a year were most likely to source most of their money from donations, which made up more than half of the income (55.5%) of the smallest charities with income below £10,000.
One-fifth (19.8%) of charities overall received income from government grants in 2023. The number of charities reporting receiving such grants in 2023 was 20,076, a 25% fall from 2022 when the total was 27,001.
Slightly more charities (7,199) reported having income from delivering government contracts than in 2022 (6,490). But the average value reported per charity reduced year on year, though the report did not specify by how much.
Commission sees rise in charity registrations
Separately, the Charity Commission released its own annual report and accounts for the year ending 31 March 2025, which showed an operating income of £2.3m and a net operating expenditure of £32m.
The organisation said it had received 9,836 applications to register a charity in 2024-5, up from 9,008 in 2023-4.
It added that it had managed to complete 86% of registration, permission and advice requests within 30 working days, compared with 77% during 2023-24.
Over the course of the 2024-25 year, the commission used its inquiry powers 843 times, a significant rise from 2023-24 when the total was 530.
It opened 112 new inquiries, up from 89 in 2023-4. “A significant factor in the increase is the number of double defaulting charities (where a charity has failed to file its accounting information for two or more years in the last five) entering into inquiry,” the report said.
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