Big changes are coming to charity accounting. From 1 January 2026, the new Statement of Recommended Practice (SORP) will apply, and it’s set to reshape how charities report their finances.
If you work in the charity sector, you might be wondering: What does this mean for us? Will it make life easier or harder? The good news is, these changes aim to make reporting clearer, more proportionate, and better aligned with modern standards.
Our team at DJH works with charities every day, so we’ve broken down what’s changing and how you can prepare.
Why are these charity reporting changes happening?
The charity sector has been asking for updates that balance transparency with practicality. The new SORP reflects feedback from charities, regulators, and stakeholders, alongside the periodic review of FRS 102.
The goal? To maintain public trust and accountability while reducing unnecessary burdens for smaller organisations. In short, these changes are about making reporting fit for purpose in today’s environment.
What’s new in charity reporting under SORP 2026?
Let’s dive into the main changes and what they mean for you.
Tiered reporting framework explained: What it means for your charity
Ever felt like the reporting requirements were a bit much for your charity’s size? You’re not alone. The new SORP introduces a tiered system so reporting feels fairer:
- Tier 1: Income up to £500,000 – simplified reporting.
- Tier 2: Income between £500,001 and £15m – more detailed disclosures.
- Tier 3: Income over £15m – comprehensive reporting, including cash flow statements and ESG disclosures.
This means smaller charities won’t be bogged down with unnecessary complexity, while larger organisations provide the detail stakeholders expect. It’s important to note that if you’re close to a threshold, now’s the time to plan ahead.
Trustees’ annual report: New requirements you need to know
The Trustees’ Annual Report is getting a refresh. It’s no longer just about financials – it’s about telling your story. The updates include:
- Clearer guidance on reserves and risk management.
- More focus on future plans and sustainability.
- For Tier 3 charities, ESG and impact reporting will be mandatory (others are encouraged to adopt these practices).
Think of this as an opportunity to showcase the difference you’re making, not just the pounds and pence.
Accounting changes under SORP 2026: Key updates
Here’s where the technical stuff comes in:
- Lease Accounting: Most leases will now appear on the balance sheet as “right-of-use” assets with matching liabilities.
- Income Recognition: A new five-step model for income from exchange transactions will apply.
- Social Investments: Reporting simplified and aligned with the Charities Act 2011.
- Provisions and Contingencies: Clearer, more practical requirements.
These changes might sound small, but they could affect how your accounts look – and how funders interpret them.
Audit and examination thresholds are changing
From 30 September 2026, thresholds will increase:
- Independent examination: income over £40,000 (up from £25,000).
- Professional examiner: income over £500,000 (up from £250,000).
- Audit: income over £1.5m or assets over £5m.
This means fewer smaller charities will need audits, reducing administrative costs and freeing up resources for frontline work.
How charities can prepare for the 2026 SORP updates
So, what should you do now? Here’s a roadmap:
- Assess Your Tier
Start by reviewing your latest financial statements and projected income. Knowing which tier you fall into will shape your reporting obligations. If you’re close to a threshold, consider how future growth or funding changes might push you into a higher tier.
- Update Your Accounting Systems
The new lease accounting rules mean most leases will need to be recognised on the balance sheet. This could affect your reported assets and liabilities, so ensure your accounting software can handle these changes. If you rely on manual processes, now is the time to consider automation or seek professional support.
- Review Income Streams
The five-step income recognition model will impact how you account for grants, contracts, and trading activities. Charities with complex funding arrangements should map out income flows and identify where adjustments will be needed.
- Prepare Trustees for Enhanced Reporting
The Trustees’ Annual Report is becoming more detailed, particularly around reserves, risk management, and future plans. For larger charities, ESG and impact reporting will be mandatory. Trustees should understand these requirements and allocate time for strategic discussions well before year-end.
- Engage Auditors or Examiners Early
With thresholds changing, some charities may no longer need an audit, while others might move from independent examination to professional review. Speak to your auditor or examiner early to confirm what applies and avoid last-minute surprises.
- Invest in Training and Guidance
Change can feel overwhelming, but training makes a huge difference. Our team can provide tailored workshops for finance teams and trustees, ensuring everyone understands the new requirements and how to implement them effectively.
- Communicate Internally
Don’t forget your wider team. Operational staff should understand how reporting changes might affect budgeting, project planning, and funding applications. Clear communication will help avoid confusion and ensure compliance.
FAQs about SORP 2026
What is SORP 2026?
SORP 2026 is the updated Statement of Recommended Practice for charity accounting, applying to accounting periods starting on or after 1 January 2026.
When do the new charity reporting rules start?
They apply to financial years beginning on or after 1 January 2026, with audit threshold changes from 30 September 2026.
How will the changes affect small charities?
Smaller charities will benefit from simplified reporting under Tier 1 and higher audit thresholds, reducing administrative burden.
Final thoughts
The new SORP is designed to make charity reporting clearer, fairer, and more relevant. While change can feel daunting, early preparation will make the transition smooth and stress-free.
Our team at DJH specialises in supporting charities through regulatory changes like these. If you’d like to discuss how these updates affect your organisation, or need help implementing them, get in touch with us today.
For full guidance, visit the Charity SORP website.
