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Charities SORP 2026 introduces major changes to accounting, reporting and governance.
17 December 2025
Charities SORP 2026 introduces major changes to charity accounting, reporting and governance for periods starting on or after 1 January 2026.
The revised SORP (published in October 2025) aligns charity reporting more closely with FRS 102 and introduces a new three-tier reporting framework, enhanced trustees’ reports and updated rules on lease accounting and income recognition.
Charities, trustees and finance teams should start preparing now to ensure accounts remain compliant, transparent and audit-ready.
Charities SORP (Statement of Recommended Practice) 2026 sets out how charities should prepare their accounts under FRS 102. It replaces SORP 2019 with a focus on clearer, more transparent reporting.
A central change within Charities SORP 2026 is the introduction of a three-tier reporting framework, based on gross income:
Tier 1 charities: Income up to £500,000
Tier 2 charities: Income between £500,001 and £15 million
Tier 3 charities: Income over £15 million
Each tier introduces progressively more detailed disclosure and presentation requirements within the statutory accounts.
From a charity audit and assurance perspective, it is important to note that:
Only Tier 3 charities, and those that do not qualify as small entities under FRS 102, will be required to prepare a statement of cash flows
Understanding your charity’s tier early will help determine the scale of changes required to your charity accounts and audit process.
The revised SORP incorporates significant updates from FRS 102, creating particular challenges in two key areas of charity accounting.
Under the new rules, most operating leases will be recognised on the balance sheet, increasing reported assets and liabilities. The SORP also introduces specific guidance for:
Low-value leases
Concessionary or “peppercorn” leases commonly used by charities
These changes may have a material impact on the balance sheet and should be reviewed well in advance of your next charity audit.
Updated income recognition rules may affect how and when charities recognise:
Grant income
Contract income
Donations with conditions or performance obligations
Early review of funding agreements is essential to avoid unexpected changes to reported income.
Improving transparency and accountability is a key objective of Charities SORP 2026. Trustees’ annual reports must now be more clearly linked to the financial statements.
Charities will need to ensure their trustees’ reports:
Clearly link narrative reporting to the charity accounts
Reconcile reserves figures and policies
Include disclosure of volunteer contributions
Outline future plans and strategic objectives
Larger charities will face expanded reporting obligations, including:
A new sustainability section, covering ESG considerations
Enhanced disclosure of principal risks and uncertainties
These changes will increase the importance of early planning between trustees, finance teams and charity auditors.
The Department for Digital, Culture, Media & Sport (DCMS) has announced important changes to charity reporting thresholds in England and Wales.
From 30 September 2026:
The accruals accounts threshold for non-company charities will increase from £250,000 to £500,000
Audit and independent examination thresholds will also rise
These changes are expected to reduce compliance costs for smaller charities, while still maintaining appropriate levels of financial oversight.
While Charities SORP 2026 aims to simplify charity reporting and improve clarity for stakeholders, it introduces increased complexity in charity accounting, lease treatment and income recognition.
To prepare effectively, charities should:
Assess the impact on their charity accounts as early as possible
Provide training for trustees and finance teams
Review example accounts and sector guidance
Engage with their charity audit and accounting advisers early
At Bishop Fleming, we work with charities of all sizes to strengthen governance, manage risks and plan sustainably. Our specialist charity accounting and audit team provides practical support, technical advice and audit-ready solutions to help organisations transition smoothly to Charities SORP 2026. Please get in touch with our charity team.
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