Charity sector shows resilience: Analysing the Annual return 2023

The Charity Commission recently released its analysis of the Annual Return 2023, offering a comprehensive look at the financial and operational health of over 100,000 registered charities in England and Wales. The report provides valuable insights into how the sector is adapting to economic pressures, shifting funding sources, and evolving public expectations.

Sector finances at a glance

• Total income: £96.4 billion (+6.8% from 2022)
• Total expenditure: £95.7 billion (+9.6% from 2022)
• The income-expenditure gap narrowed to just £701 million, the smallest in five years.

While the vast majority of charities (91.7%) had annual incomes under £1 million, a small group of larger organisations(just 2.7%) had annual incomes over £5 million, and accounted for over 75% of the sector’s total income. This concentration highlights the growing financial influence of a relatively small number of large charities.

Reserves and financial resilience

• 55% of charities reported income exceeding expenditure.
• 43% spent more than they earned—particularly smaller charities.
• Reserves remained stable at £75 billion.

The report shows a mixed picture of financial resilience. Just over half of charities (55%) reported income exceeding expenditure, while 43% spent more than they earned—particularly among smaller charities with incomes under £100,000.

Despite these pressures, sector-wide reserves remained stable at £75 billion, with unrestricted funds being the most common type.

This suggests that while many charities are operating close to the edge, the sector as a whole retains a strong financial buffer.

Where the money comes from

Charities continue to rely on a diverse mix of income sources:

• Charitable activities remain the largest contributor at 48.5% of income.
• Donations and legacies accounted for nearly a third of income, totalling £31.4 billion.
• Trading and investments provided smaller but still significant contributions.

One notable trend is the shift in government funding. While the number of charities receiving grants fell sharply (from 27,001 to 20,076), those earning income through contracts increased.

This may reflect a move toward more performance-based funding models and a need for charities to demonstrate measurable outcomes.

Grant-making activity

• 31,427 charities awarded grants in 2023.
• £11.8 billion went to other charities.
• £1.2 billion supported individuals directly.

The results underscore the sector’s role not only in delivering services directly but also in supporting a wider ecosystem of charitable work.

People power: Staff and volunteers

The sector continues to be powered by a blend of paid professionals and dedicated volunteers:

• Nearly 1.8 million people were employed across 50,000 charities.
• An estimated 6.2 million volunteers contributed their time and skills.

With an average of 3.5 volunteers for every paid worker, the data highlights the critical role of unpaid support in sustaining charitable operations.

While 70% of charities reported having volunteers, only 49% had paid staff—emphasising the grassroots nature of much of the sector.

Trustees and governance

Governance remains largely voluntary, with nearly 923,000 trustees serving across the sector.

Only 9.5% of charities reported offering any form of benefit to trustees, and just 0.69% paid trustees for acting in that role. This reflects the continued reliance on unpaid governance and the strong tradition of voluntary leadership in UK charities.

Additional information on paying trustees for carrying out trustees’ duties was included in our May 2025 newsletter.

What this means for the sector

The 2023 data paints a picture of a sector that is financially stable but facing increasing pressure to do more with less.

Larger charities continue to dominate income generation, while smaller organisations often operate on tight margins.

The shift in government funding models and the continued importance of volunteers and trustees highlight the need for adaptability, transparency, and strong governance.

As the sector looks ahead, these insights can help charities benchmark their performance, plan for sustainability, and advocate for the support they need to thrive.

Learn more and get advice

Get in touch with our Charities team if you’re looking to learn more about how this could affect your charity or non-profit organisation.

Please note that this content is not intended to give specific technical advice. It is designed to highlight some of the key issues rather than provide an exhaustive explanation of the topics. Professional advice should always be sought before action is either taken or refrained from as a result of information contained herein.

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