Charity accounting changes for SORP from 2026 – what’s changing and what to expect

What is changing?

1. A new Charities SORP applies from 1 January 2026

The Charities Statement of Recommended Practice (SORP) sets out how charities prepare their accruals accounts under UK accounting standards.

A new SORP (SORP 2026) has now been issued and will apply to accounting periods beginning on or after 1 January 2026.

In practice, this means:

• Charity accounts will reflect the latest UK accounting standards

• Reporting requirements will be more clearly scaled by charity size

• Greater emphasis will be placed on clear explanation, not just technical compliance

If your charity prepares accruals accounts, this SORP will apply to you — and we’ll be applying it behind the scenes as part of our normal year-end process.

2. A new three-tier reporting framework

Under the new SORP, charities will fall into one of three tiers based on income:

• Tier 1 – income up to £500,000

• Tier 2 – income between £500,000 and £15 million

• Tier 3 – income over £15 million

The tier determines the level of narrative and disclosure detail required in the accounts, particularly within the Trustees’ Annual Report.

From our point of view, this is a positive step. It allows reporting to be proportionate and focused, rather than forcing smaller charities to jump through unnecessary hoops. The aim is clearer reporting — not heavier armour.

3. Trustees’ Annual Reports will matter more

One of the most noticeable changes is a stronger focus on the Trustees’ Annual Report.

Going forward, trustees will be expected to:

• Clearly explain what the charity has done and why it matters

• Provide proportionate impact reporting

• Be more transparent about:

  • Financial sustainability and reserves

  • Key risks and future plans

  • Environmental, social and governance matters (particularly for larger charities)

This isn’t about producing longer reports or adding fluff. It’s about helping readers — funders, regulators and supporters — understand the charity’s mission, impact and direction more easily.

This is also an area where good guidance makes a real difference, and where we’ll be working closely with trustees to help tell the story clearly and confidently.

4. Changes to how income is recognised

The new SORP updates guidance on when and how income is recognised, aligning it with recent changes in accounting standards.

This mainly affects:

• Grant income, especially where grants include conditions or deliverables

• Service contracts and trading income

• Legacy income, where timing differences between recognition and cash can be significant

For many charities, the headline figures won’t change dramatically. What will matter more is getting the classification and explanation right. This is an area we already treat carefully, to avoid surprises and keep reporting robust.

5. Lease accounting will change for some charities

Some lease arrangements that were previously kept off the balance sheet may now need to be recognised as:

• A right-of-use asset

• A corresponding lease liability

This doesn’t change cash flow, but it can affect:

• Balance sheet presentation

• Reported reserves

• How longer-term commitments are explained to trustees

Where this applies, it’s very much a plan-ahead exercise, not a sudden twist in the plot — and something we’ll deal with well before the 2026 accounts are prepared.

6. Cash flow statements – fewer required under the SORP

Under the new SORP:

• Only the largest charities (Tier 3) are normally required to prepare a cash flow statement

That said, accounting standards still apply alongside the SORP, so in some cases a cash flow statement may still be required. We’ll assess this as part of the normal year-end process and advise accordingly.

Separate changes later in 2026: thresholds and external scrutiny

Alongside the SORP changes, the government has announced updates to charity reporting thresholds in England and Wales, expected to take effect from October 2026.

These include increases to:

• The audit threshold

• The independent examination threshold

• Certain thresholds affecting when accruals accounts are required

These changes sit outside the SORP, but they interact with it. As always, we’ll keep a close watch on the final legislation and guidance as it’s confirmed.

What should charities be doing now?

For most charities, no immediate action is required.

That said, the strongest outcomes tend to come from early awareness. Sensible preparation includes:

• Knowing that 2026 accounts may look slightly different

• Understanding that narrative reporting will carry more weight

• Making sure trustees are comfortable discussing:

  • Impact and outcomes

  • Financial sustainability

  • Key risks and future plans