How Much Should a Charity Hold in Reserves? Reserves Health by Cause

Reserves are the question trustees most often get wrong in both directions: some hold far too little to weather a lost grant, others sit on balances so large that funders start to ask why. Analysis of the Charity Commission full register extract shows just how much the norm varies by cause. The typical animal welfare charity holds 8.8 months of free reserves, while the typical recreation charity holds just 3.3 months.^[1]

This article sets out reserves health across every charitable cause, explains what the figures mean, and gives trustees a practical way to decide whether their own level is defensible. The full dataset is in our UK Charity Cause Income and Reserves Health Index.^[1]

What free reserves are, and how we measure them

Free reserves are the funds a charity could actually spend if it needed to: unrestricted funds, excluding money tied up in fixed assets or committed to restricted purposes. They are the buffer that keeps a charity running when income is interrupted.

To measure reserves health, we take each charity's free reserves from its most recent annual return (part B) and divide by its latest annual expenditure, then convert to months.^[1] A charity with free reserves equal to three months of expenditure could, in principle, keep operating for about three months if all income stopped. We report the median months for each cause, plus the share of charities in that cause holding under three months, a common informal marker for a thin position.

The causes that hold the most reserves

At the top of the reserves ranking are causes with stable, recurring income and long-established balances:^[1]

• Animal welfare charities hold the most, at a median 8.8 months of free reserves. Only 26.7% hold under three months, the lowest under-reserved share of any cause.
• Armed forces and emergency services charities hold 7.8 months, with 29.8% under three months.
• Religious activities charities hold 5.4 months, with 38.3% under three months.

These causes tend to draw on regular giving, legacies and membership income, which is more predictable than one-off grants and lets them build a deeper buffer.

The causes that hold the least

At the other end are causes that lean heavily on restricted grant funding, which limits how much unrestricted reserve they can accumulate:^[1]

• Recreation charities hold the least, at a median 3.3 months, and are the most under-reserved: 47.1% hold under three months of free reserves.
• Economic and community development charities hold a median 3.5 months, with 44.8% under three months.
• Arts, culture, heritage and science charities hold 3.5 months, with 45.5% under three months, the second-highest under-reserved share.
• Human rights, equality and diversity charities hold 3.7 months, with 43.7% under three months.

A low figure here reflects the funding model, not mismanagement. Grant-funded charities often cannot build large unrestricted reserves, because their income arrives earmarked for specific projects.

Where the biggest causes sit

The largest and most familiar cause groups cluster in the middle of the reserves range. Health and saving of lives charities hold a median 4.9 months, with 35.5% under three months. Disability charities hold 4.3 months (38.7% under three months), and children and young people charities, the single largest group, hold 4.0 months with 41.4% under three months.^[1]

Overseas aid and famine relief charities hold a median 4.1 months but have a high under-reserved share of 43.9%, reflecting a wide spread between well-funded international bodies and small volunteer-led groups. Accommodation and housing charities, the highest earners on the register, hold 4.5 months with 39.6% under three months.^[1]

The full table for all 24 causes is in the UK Charity Cause Income and Reserves Health Index.

So how much should your charity hold?

There is no universal answer, and the data makes that clear: a healthy level for a religious charity looks nothing like a healthy level for a grant-funded community charity. The Charity Commission does not set a required figure. What it expects is a written reserves policy that states the level the trustees aim to hold and the reasoning behind it.

A useful way to set that level is to work from risk rather than from a round number. Ask how long it would take to wind down responsibly if income stopped, how volatile your income is, and what commitments (salaries, leases, service promises) you could not switch off quickly. A charity with three months of predictable grant income and no staff may be perfectly safe on a thin reserve. A charity with employees and a lease may need considerably more.

The genuine warning sign in the data is not a low figure. It is a low figure with no policy behind it. If your charity is in the under-three-months group, the priority is not to rush to build reserves overnight; it is to write down why your level is what it is, and what you would do if income fell.

What trustees should do next

• Write or review your reserves policy. It belongs in the trustees' annual report, and our charity accounts service covers it as standard.
• Make sure your free reserves figure is calculated correctly, separating restricted funds and funds tied up in fixed assets. Clean records through our charity bookkeeping service make this straightforward.
• Benchmark against your own cause, not the sector as a whole. Compare your months of reserves to the median for your cause in the Cause Income and Reserves Health Index.
• Check whether your income places you near a scrutiny threshold. Our Charity Scrutiny Cliff-Edge Monitor shows how many charities sit just below each gate.

A note on jurisdiction

This analysis covers charities registered with the Charity Commission for England and Wales only. Scotland is regulated by OSCR and Northern Ireland by the Charity Commission for Northern Ireland, each with its own register and reserves expectations. Charities in those jurisdictions should refer to their own regulator.

Where to go next

The full dataset behind this article, covering reserves health and median income for all 24 charitable causes, is available in our UK Charity Cause Income and Reserves Health Index. For a companion read on how income itself varies by cause, see which charitable causes earn the most.

To discuss your reserves policy or your annual accounts, use the contact form. Our charity accounts service covers the reserves policy, the trustees' annual report and the annual accounts in full.

Sources

1. Charity Commission for England and Wales, full register extract, published under the Open Government Licence v3.0. register-of-charities.charitycommission.gov.uk. Data processed and presented in the UK Charity Cause Income and Reserves Health Index (Trustee Tax, generated 2026-08-04). Reserves health = free reserves, the trustees' own declared reserves figure from the most recent annual return (part B), divided by latest expenditure, expressed in months. "Under 3 months" is the share of charities in that cause with fewer than three months of free reserves. A charity may carry more than one cause classification, so counts describe charities with that code, not unique organisations. Registered, main charities only.