Charities SORP 2026: what changes in charity accounts

The Charities SORP 2026 is the new rulebook for charity accruals accounts across the UK, and it applies to accounting periods starting on or after 1 January 2026. It sorts charities into three tiers by income, brings most leases onto the balance sheet, changes how some income is recognised and asks for a fuller trustees’ annual report. A charity with a 31 December 2026 year end is among the first to report under it.

What is the Charities SORP 2026?

The SORP (Statement of Recommended Practice) explains how charities apply FRS 102, the UK accounting standard, to their accounts. The Charity Commission announced its publication on 31 October 2025.

It is issued by the SORP-making body, made up of the charity regulators for England and Wales, Scotland and Northern Ireland, with the Charities Regulator for Ireland as an observer. It replaces the previous FRS 102 SORP and is mandatory for UK charities preparing accruals accounts. The full text is on the Charity SORP website.

The three reporting tiers

Your tier depends only on gross income for the financial year. The more income, the more you must disclose.

ICAEW notes the £500,000 boundary was kept despite criticism that it was too low. The Commission says the SORP-making body will look at the tier levels again during 2026-27.

Leases move onto the balance sheet

The biggest accounting change comes from FRS 102 itself. The FRC’s Periodic Review 2024 explainer says the operating and finance lease split is removed for lessees, so most leases now create a right-of-use asset and a lease liability.

What this means for a charity’s accounts:

• Higher assets and liabilities on the balance sheet
• Rent replaced by depreciation and interest in the statement of financial activities
• Two exemptions: leases of 12 months or less, and low-value assets
• Transition: the cumulative effect goes to funds at the date of first application, and comparatives are not restated

The SORP adds charity-specific guidance on peppercorn and low-value leases. Check loan covenants and reserves policies, since a new lease liability can change the picture. Our explainer on FRS 102 changes from January 2026 covers the standard in more detail.

New rules for income

Income from contracts, such as service contracts with councils or trading income, now follows the five-step model in FRS 102 Section 23. Revenue is recognised when, or as, control of the goods or services passes to the customer.

Donations, grants and legacies without exchange terms stay outside that model. The SORP gives charity-specific examples to help draw the line between exchange and non-exchange income. Review your largest contracts and grant agreements before the year end, as the timing of income may change.

A fuller trustees’ annual report

The trustees’ annual report gets refreshed requirements. According to the Commission and ICAEW, trustees must now:

• link the narrative report to the financial statements
• reconcile the reserves figure to the accounts
• explain future plans
• report on volunteer activity
• address impact in a dedicated section
• for larger charities, cover principal risks and a sustainability (ESG) heading

Tier 1 and 2 charities may choose to report on ESG matters; Tier 3 charities must.

Other changes

The SORP also simplifies reporting for social investments, aligning the definition with the Charities Act 2011, and makes the rules on provisions and contingencies easier to follow. Only Tier 3 charities, and charities that are not small entities under FRS 102, must prepare a statement of cash flows.

New thresholds in England and Wales

Separately, DCMS raised the charity accounts and scrutiny thresholds for years ending on or after 30 September 2026. The Charity Commission’s guidance lists:

The Commission says more than 5,130 non-company charities could now choose receipts and payments accounts. Scotland and Northern Ireland keep the £250,000 accruals threshold.

What trustees and advisers should do now

1. Confirm the first year the SORP 2026 applies to each charity.
2. Work out the tier from gross income for that year.
3. List every lease, including peppercorn leases, and calculate opening right-of-use assets and liabilities.
4. Review contracts and grants for exchange income under Section 23.
5. Check audit or examination needs against the new thresholds.
6. Draft the new trustees’ report sections early, especially impact and reserves.
7. Plan the Companies House filing for charitable companies. See how to file accounts at Companies House and the filing deadlines.

Frequently asked questions

When does the Charities SORP 2026 take effect?

It applies to charity accruals accounts for accounting periods starting on or after 1 January 2026.

What are the SORP 2026 tiers?

Tier 1 covers gross income up to £500,000, Tier 2 covers £500,000 to £15 million and Tier 3 covers income above £15 million.

Do small charities have to follow the SORP 2026?

Only if they prepare accruals accounts. In England and Wales, non-company charities with income below £500,000 can prepare receipts and payments accounts instead.

Do charities need a cash flow statement under SORP 2026?

Only Tier 3 charities, and charities that are not small entities under FRS 102, must prepare a statement of cash flows.

What is the new charity audit threshold?

In England and Wales, an audit is required where income exceeds £1.5 million, or assets exceed £5 million, for years ending on or after 30 September 2026.