A new version of the Charities SORP (Statement of Recommended Practice) has been published and will apply to accounting periods starting on or after 1 January 2026. You can read the full version of the Charities SORP 2026 on the Charities SORP website.
The Charities SORP explains how FRS 102 (Financial Reporting Standard) is applied by charities preparing accruals accounts. It sets out additional requirements for charities on account presentation, disclosures and the trustees’ annual report.
The SORP applies to charities preparing accruals accounts in the United Kingdom and the Republic of Ireland, subject to the legal requirements of the jurisdiction of the charity. In England and Wales, charitable companies must prepare accruals accounts and prepare receipts and payments based accounts.
You can read FAQs about applying the Charities SORP in this blog article and watch this introductory video.
Table of contents
- Why was the Charities SORP updated?
- A new three-tier system for the Charities SORP
- SORP 2026 – tier differences at a glance
- Other key changes in the Charities SORP 2026
- How will these changes affect my charity?
- How can ExpensePlus help me comply with the Charities SORP?
- Where can I find out more about the Charities SORP?
Estimated reading time: 7 minutes
Why was the Charities SORP updated?
The previous Charities SORP was released in 2019. The new SORP 2026 brings charity accounting up to date with wider changes in accounting standards. It is designed to make reporting clearer, more proportionate for charities of different sizes, and more useful – especially for charity trustees, funders and the public.
It introduces significant new accounting requirements in areas such as income recognition and lease accounting, although the effect on an individual charity will depend on its activities and transactions.
The biggest change for most charities is the new three-tier system. This aims to make reporting simpler for smaller charities and more transparent for larger ones.
A new three-tier system for the Charities SORP
Tier income bands
Tier 1 – Up to £500,000
Simpler requirements designed for small charities. You will still prepare accruals accounts, but the disclosures are lighter than the higher tiers.
Tier 2 – Between £500,000 and £15 million
The ‘standard’ SORP requirements — similar to what most charities follow now.
Tier 3 – Over £15 million
Extra disclosures for the largest charities to give greater transparency about their activities, impact and governance.
Charity accounting threshold changes 2026
Separate changes to charity accounting and scrutiny thresholds will apply in England and Wales to financial years ending on or after 30 September 2026. These changes may affect the type of accounts a charity can prepare and whether you need an independent examination or audit.
If your charity’s gross income is below the new £500,000 threshold and it is not a charitable company, you may now be eligible to prepare receipts and payments accounts rather than accruals accounts which require you to follow the Charities SORP. This option is not available to charitable companies, and trustees should also check the charity’s governing document and consider whether changing accounting basis is appropriate.
This blog post about the threshold changes will help your charity decide whether to keep creating accounts on an accruals basis or whether to change to creating accounts on a receipts and payments basis, if the threshold changes enable this.
SORP 2026 – tier differences at a glance
Some of the changes are about what you should include in the Trustees’ Annual Report (TAR) for each reporting tier.
| Area | Tier (≤£500k) | Tier 2 (£500k-£15m) | Tier 3 (>£15m) |
|---|---|---|---|
| Impact reporting (TAR) | Must summarise main achievements and difference made | Must explain performance against objectives, measures used, outputs and outcomes | Must provide fuller impact narrative including fundraising performance if material |
| Environmental/governance/social (sustainability) | May report | May report | Must summarise how environmental, governance & social matters are managed |
| Reserves policy (TAR) | Must explain policy and amount held | Same as tier 1 & fuller financial narrative | Same as tier 2 & forward-looking commentary on financial risks |
| Principal risks (TAR) | Not specifically required | Must describe principal risks (including environmental & cyber risks) | Same as tier 2 & stronger forward-looking commentary on financial risks |
| Income (TAR) | Basic financial review | Must explain material legacy income recognised before receipt | Same as tier 2 |
| Fundraising performance (TAR) | Not specifically required | Not specifically required | Must review performance of material fundraising & effect of fundraising costs |
| Remuneration governance (TAR) | Not required | Must explain how pay is set and & benchmarks used | Same as tier 2 but more robust |
| Statement of Cash flows | Not required by SORP | Not required by SORP | Required by SORP (though FRS 102 small entity rules may still apply) |
| SOFA format | May use natural classification | Must use activity-based reporting | Same as tier 2 |
Other key changes in the Charities SORP 2026
The new SORP also introduces some practical updates and clearer guidance. Here are the highlights:
Income recognition
There is updated guidance on when income should be recognised, particularly for grants and contracts. The rules now more clearly distinguish between exchange transactions (such as service contracts) and non-exchange income (such as donations and grants), and when performance conditions delay recognition. If your charity receives significant grant or contract income, it’s worth reviewing this carefully.
Lease accounting
There are significant changes to lease accounting for charities that are lessees. Most leases will now result in the recognition of a right-of-use asset and a corresponding lease liability, although exemptions are available for qualifying short-term leases and leases of low-value assets.
This may affect charities that rent property or lease equipment. Special consideration may also be needed for peppercorn, rent-free and other significantly below-market arrangements, which may contain a donated element as well as a lease.
For more information, see Stewardship’s blog about lease accounting and the SORP 2026.
Trustees’ Annual Report (TAR)
The trustees’ annual report requirements in the SORP 2026 have been substantially reorganised and are now presented by reporting tier. All charities must provide a meaningful account of their activities, main achievements, financial position, reserves and future plans.
Tier 2 charities have additional requirements covering areas such as impact, principal risks, governance and financial performance.
Tier 3 charities must also report on environmental, governance and social matters and provide further forward-looking information.
This article gives some general advice on writing a good and meaningful trustees’ annual report.
However, all charities should view the specific requirements for their income tier in the SORP 2026 when preparing to write their trustees’ annual report.
Social investments
Reporting has been simplified and terminology aligned more closely with the Charities Act 2011, making this area clearer for charities that make mission-related investments.
Provisions and contingencies
The guidance has been reorganised and clarified, helping charities better understand what should (and should not) be recognised as a provision or disclosed as a contingent liability.
How will these changes affect my charity?
If your charity or church prepares accounts on a receipts and payments basis, the changes in the Charities SORP 2026 won’t affect you. Only charities which prepare accounts on an accruals basis follow the SORP.
If you prepare accruals accounts, then you will need to follow SORP 2026 for accounting years that start on or after 1 January 2026.
For example:
- If your year end is 31 December, your first SORP 2026 accounts will be for the year ending 31 December 2026.
- If your year-end is 31 March, your first SORP 2026 accounts will be for the year ending 31 March 2027.
How can ExpensePlus help me comply with the Charities SORP?
Unlike other accounting packages, ExpensePlus is built with fund accounting at its core.
It helps you keep your accounting records SORP-compliant and easy to understand and dissect as needed.
For example, amongst the many reports available in ExpensePlus, you’ll find the main financial statements you need to comply with the Charities SORP in the correct formats, ready to download to PDF or CSV.
The software has an inbuilt year-end template and checklist that you can complete with guidance for preparing your year-end accounts.
In ExpensePlus, automated warning messages will alert you when you’re about to do something not typically allowed, for example, transfer money out of a restricted fund.
We publish regular blog articles to help you understand fund accounting and offer excellent free training sessions.
Where can I find out more about the Charities SORP?
For many small churches and charities, the Tier 1 presentation and reporting requirements should be more proportionate than those applying to larger charities. However, the underlying accounting changes – particularly those concerning income recognition and leases – can still be significant where they apply.
It is worth taking the time to understand what’s changing and to talk it through with your independent examiner or accountant.
If you have queries regarding the SORP and its specific application to your organisation and your accounts, you should contact your Independent Examiner or Auditor.
Lastly, the Institute of Chartered Accountants in England and Wales (ICAEW) has further resources relating to the SORP.
Tim is a qualified ICAEW Accountant at Wyatt & Co Accountants based in Leeds, which specialises in providing accounting services for charities, including independent examinations, outsourced finance, as well as governance advice.
