Reserves policy guide
Charity reserves policy template for UK trustees
A useful reserves policy is not a generic paragraph or a fixed number of months. Trustees need to explain what reserves mean for their charity, how free reserves were calculated, why the target or range is suitable, what will happen if reserves are too high or too low, and how the policy is monitored through budgets, risks, accounts, and annual reporting.
Calculate free reserves first
- Start from unrestricted funds, then exclude funds that are not freely available for general charitable purposes
- Exclude tangible fixed assets used to run services, social investments, designated funds set aside for essential future spending, and commitments not already shown as liabilities
- Check restricted funds separately; they are outside reserves but may affect how much unrestricted reserve is needed for particular activities
- Use current accounts, management accounts, cash-flow forecasts, committed costs, funding restrictions, pension or lease commitments, and grant conditions before trustees approve wording
- Keep the calculation table with the board paper so the annual report wording can be traced back to evidence rather than copied from a template
Set a target or explain no target
- There is no single level, range, or months-of-spend figure that is right for every charity, so the policy should explain the charity's own risks and operating model
- State whether the target is a GBP amount, a range, or a months-of-essential-unrestricted-spend measure, and explain why that basis fits the charity
- Consider income reliability, expenditure plans, future opportunities, committed costs, service continuity, vulnerable beneficiaries, funder timing, closure risk, and cash-flow pressure
- If trustees choose a zero or very low reserves policy, explain the alternative protections and why the decision does not expose beneficiaries, staff, volunteers, creditors, or trustees to unmanaged risk
- If reserves are above target, explain whether the position is temporary, designated for a real future need, or evidence that more should be spent on charitable activity
Write annual report wording
- Describe the reserves policy, the amount of reserves held, why reserves are held, and whether the current position is above, below, or within the target
- Quantify and explain material designated funds, commitments, restricted funds, functional fixed assets, and likely timing of future expenditure where they affect public understanding
- For larger charities, include total funds, restricted funds not available for general purposes, designated or committed amounts, assets that can only be realised by disposal, and steps to align reserves with policy
- Avoid boilerplate such as 'three months reserves are held' unless the calculation, risks, spend base, exclusions, and monitoring route are visible
- Make the wording readable for funders, beneficiaries, donors, examiners, auditors, staff, and the Charity Commission, not only for the finance lead
Monitor and update the policy
- Review the reserves target at least annually as part of budgeting, planning, risk review, and trustee reporting
- Track movement during the year so trustees understand whether reserves are building, falling, or being used for planned purposes
- Link reserves triggers to actions: spending plans, fundraising plans, cost controls, grant timing, service changes, closure planning, serious incident review, or professional advice
- Use the risk register and financial controls review to test whether the reserves policy still reflects real uncertainty and control quality
- Update the annual report if there has been a significant change in reserves level, policy basis, financial climate, funding model, risk profile, or trustee plan
Official sources
Official source
Charity reserves: building resilience (CC19)
Charity Commission overview for England and Wales explaining what reserves are, why policy wording matters, legal reporting requirements, and trustee oversight.
Official source
Charity reserves detailed CC19 guidance
Detailed CC19 guidance covering free reserves, excluded funds, zero-reserves explanations, annual-report wording, monitoring, and small or complex charity approaches.
Official source
Charity reporting and accounting essentials (CC15d)
Charity Commission reporting and accounting requirements for periods before 1 January 2026, including annual reports, accounts, filing, examination, and audit context.
Official source
Prepare a charity trustees annual report
GOV.UK annual report guidance explaining what trustees should include by income and asset level, and why the report helps funders and beneficiaries understand the charity.
Official source
Charities and risk management (CC26)
Charity Commission risk-management guidance that supports reserves targets, uncertainty analysis, controls, and trustee monitoring.
Official source
Improving your charity's finances (CC12)
Charity Commission guidance for active financial management, financial difficulty, insolvency risk, and trustee action when reserves are low or falling.
Official source
Prepare a charity's annual accounts
GOV.UK accounts route for charity accounts preparation and filing context before trustees write public reserves explanations.
Official source
Internal financial controls for charities (CC8)
Charity Commission controls guidance for finance information, monitoring, banking, income, expenditure, assets, fraud, and record quality behind reserves reporting.
Related tools
Interactive tool
Charity reserves policy checker
Check whether a charity reserves policy has the evidence trustees need before annual reporting, grant conversations, budget review, risk review, or reserves target changes. The checker follows Charity Commission CC19 themes without giving accounting, audit, insolvency, investment, or legal advice.
Interactive tool
Charity risk register checker
Check whether a charity risk register has the evidence trustees need before annual reporting, insurance renewal, cyber review, service planning, reserves review, funding decisions, or major supplier changes. The checker follows Charity Commission CC26 themes without giving legal, insurance, audit, safeguarding, investment, or governance advice.
Interactive tool
Charity internal financial controls checker
Check whether a charity's internal financial controls have the evidence trustees need before year-end accounts, fraud review, bank mandate changes, online banking setup, fundraising events, grant payments, supplier payments, or serious incident follow-up. The checker follows Charity Commission CC8 themes without giving accounting, audit, tax, legal, investment, fraud investigation, or governance advice.
Interactive tool
Charity accounts filing deadline checker for England and Wales
Enter a charity financial year end date to estimate the usual Charity Commission annual return deadline and build a filing evidence checklist. The tool follows the public 10-month rule but does not replace Charity Commission guidance, professional advice, or the official register.
Interactive tool
Charity accounting software requirements checker
Check whether a charity is ready to shortlist Xero, QuickBooks, Zoho, Microsoft Dynamics 365 Business Central, fundraising-platform exports, or a more specialist finance setup. The checker turns finance software buying intent into requirements, reconciliation risks, and source-checked software routes.
Interactive tool
Charity serious incident reporting checker
Check whether an actual or alleged incident has strong Charity Commission serious-incident reporting signals and whether the trustee body has the evidence needed before using the official report form. The checker follows GOV.UK serious incident guidance without giving legal, safeguarding, criminal, insurance, audit, data-protection, or governance advice.
Interactive tool
UK charity number lookup and official register cross-check
Look up a charity number, name, or postcode in the selected imported data sample, then open the official Charity Commission register for final verification. This is a research shortcut, not a complete official database or a charity recommendation.
Common questions
FAQ
How many months of reserves should a UK charity hold?
There is no universal number. CC19 says there is no single level or range of reserves that is right for every charity, so trustees should explain the charity's own risks, income reliability, spending commitments, beneficiaries, closure risks, and financial forecasts.
FAQ
What should a charity reserves policy include?
It should explain what reserves are held for, how free reserves were calculated, what target or range trustees have chosen, why that level fits the charity, what happens if reserves are too high or too low, and how trustees monitor the policy.
FAQ
Are restricted funds included in charity reserves?
Restricted funds fall outside the definition of free reserves because they cannot be spent freely on any charitable purpose, although the nature and amount of restricted funds can affect how trustees judge the reserves needed for the charity.
FAQ
Can a charity have a zero reserves policy?
A charity can decide that a zero or very low reserves policy fits its circumstances, but trustees should explain the financial risks, alternative protections, closure or continuity plan, and why beneficiaries, staff, volunteers, creditors, and trustees are not exposed to unmanaged risk.
FAQ
What should the annual report say about reserves?
All charities should include their reserves policy, the level of reserves held, and why they are held. Larger charities are expected to give more detail about total funds, restricted funds, designations, commitments, assets, comparison with policy, and action plans.
FAQ
When should trustees review a reserves policy?
Trustees should review reserves at least annually as part of planning and budgeting, monitor reserve levels during the year, and update the policy when funding, services, commitments, risks, beneficiaries, or financial conditions change materially.
Decision notes
- This page is governance and finance guidance, not accounting advice, audit advice, insolvency advice, investment advice, legal advice, or a reserves target recommendation.
- Do not publish a reserves policy copied from another charity. CC19 expects the policy to be tailored, justified, monitored, and explainable for the charity's own circumstances.
- The page is indexable because it combines current official sources, annual-report wording, free-reserves calculation checks, risk controls, FAQs, and links to practical tools rather than offering a generic template download.
- Charities with very low reserves, sudden reserve depletion, insolvency risk, vulnerable beneficiaries, restricted-fund complexity, or large designated funds should use current Charity Commission guidance and get appropriate professional review.