How Much Should Our Charity Hold in Reserve?

Nov 5 / Lizzy Bird & Tim Wyatt
At Wyatt & Co Chartered Accountants, we’re often asked by churches and charities across the UK: “How much should we keep in reserve?” It’s an important question—and one that doesn’t come with a simple answer.

In this guide, we’ll unpack what the Charity Commission says, help you understand what counts as reserves, and share a practical three-step process for setting the right level for your organisation.

What Are Charity Reserves?

Charity reserves are the part of your unrestricted funds that are readily available to spend on your organisation’s purposes. That means:

• Not restricted income (which must be used for specific projects)
• Not designated funds (which trustees have set aside for particular future spending)
• Not tied up in fixed assets or investments
• Not liabilities or commitments already accounted for

When you subtract all those from your year-end balance, what’s left is your free reserves.

Why Hold Reserves?

Most charities hold some level of reserves. They act as a financial buffer—helping you continue your activities during unexpected changes, delays in funding, or rising costs. Reserves also give you the flexibility to respond to opportunities or emergencies when they arise.

Recent years have shown how vital that resilience can be. Many charities had to draw on reserves during global events like the pandemic—and now are in the process of rebuilding.

But there’s a balance. Trustees are stewards of the charity’s funds—not hoarders of them. You’re expected to spend money to achieve your charitable aims, while also protecting the charity’s future sustainability.

What Does the Charity Commission Say?

There’s no set figure or formula for reserves. The Charity Commission’s guidance (CC19: Charity Reserves – Building Resilience) makes this clear:

“There is no single level or even a range of reserves that is right for all charities. Any target set by trustees… should reflect the particular circumstances of the individual charity and be explained in the policy.”

In other words, it’s up to trustees to think carefully, make a plan, and write it down.

Writing or Updating Your Reserves Policy: A 3-Step Approach

Step 1: Check Your Current Policy

Your charity may already have a reserves policy. It’s usually included in the Trustees’ Annual Report and reviewed each year.

Start here. Is it still relevant? Has anything changed—like your costs, risks, or future plans?

Some charities use a fixed target (e.g. “£25,000”), others a range (e.g. “3 to 6 months of core costs”), and others link reserves to planned activity. Whatever approach you use, it should be logical and justifiable.

Step 2: Calculate What You Need

Even if you have a policy, a fresh calculation can help you decide if your current reserves are too low, too high, or just right.

Things to consider might include:

• Regular expenditure: e.g. staff, rent, programme costs

• Future projects: e.g. building works or new initiatives

• Risk factors: e.g. reliance on a single income source

• Timing gaps: e.g. grant payment delays or fundraising cycles

Some charities base reserves on 3–6 months of running costs. Others prefer to base them on the specific risks or commitments they face.

Step 3: Communicate It Clearly

Once your trustees have agreed on the right approach, write it up in a clear and simple policy.
It should include:

• How reserves are defined

• The target level (or range) you aim to hold

• Why that amount is needed

• What the current level is

• Any plans to build up or reduce reserves

This should then be included in your Trustees’ Annual Report and reviewed annually.

Final Thoughts

Creating a reserves policy isn’t just a box-ticking exercise—it’s a key part of your charity’s financial planning. Done well, it gives your trustees clarity, helps you explain your approach to funders and the public, and builds long-term resilience.

For Further Information

In this video, Tim Wyatt, from Wyatt & Co Chartered Accountants, explores the concept of reserves further

To review the Charity Commission’s resources on reserves. Here are two useful guides for trustees and charity finance teams.

• CC19: Charity Reserves – Building Resilience (2023)

• Beyond Reserves (2012), by ACEVO, CFG, IoF, and Sayer Vincent



Terms & Conditions   |   Privacy Policy   |   Cookie policy
Copyright © 2023
Created with