Updated SORP introduces a three-tier reporting framework based on annual income
From 1 January 2026, a new Charities SORP 2026 will apply to accounting periods beginning on or after that date. The updated SORP introduces a three-tier reporting framework based on annual income:
- Tier 1: income up to £500,000
- Tier 2: income £500,000 to £15m
- Tier 3: income over £15m.
This approach tailors reporting requirements to the size and complexity of a charity. Smaller charities will benefit from simplified disclosures, while larger charities will continue to provide more detailed financial information. Only Tier 3 charities (and those not eligible for small-entity exemptions) will generally be required to prepare a full statement of cash flows.
These changes are aimed at making requirements more proportionate and reducing the administrative burden on smaller charities.
SORP 2026 also updates guidance on:
- income recognition and lease accounting – charities will need to apply updated rules on recognising certain types of income and lease arrangements. These changes reflect broader updates to FRS 102 and aim to improve consistency and transparency. Practical examples are included in the SORP to assist with interpretation
- social investments – the new SORP simplifies how charities account for and report social investments, aligning definitions with the Charities Act 2011 to ensure clarity and relevance
- provisions and contingencies – reporting requirements in this area have been made easier to understand and apply, with clearer guidance for trustees and accountants alike
- trustees’ annual report requirements – have been refreshed, with clearer expectations around reserves reporting, future plans and narrative explanations that link financial results to charitable impact.
In addition, statutory accounting and audit thresholds will be increasing and are expected to come into effect on 30 September 2026, applying to accounting periods ending on or after that date. These changes are expected to reduce compliance costs for many charities.
Key changes include:
Requirement |
|
New threshold (from 30 September 2026) |
Accounts must be independently examined |
Income over £25,000 |
Income over £40,000 |
Examination must be by a professionally qualified independent examiner |
Income over £250,000 |
Income over £500,000 |
Non-company charities can choose to produce receipts and payments accounts |
Income below £250,000 |
Income below £500,000 |
Accounts must be audited |
Income over £1,000,000 Assets over £3,260,000 |
Income over £1,500,000 Assets over £5,000,000
|
Group accounts must be prepared and audited |
Aggregate income of group £1,000,000 |
Aggregate income of group £1,500,000 |
The following thresholds remain unchanged:
- registration thresholds: £5,000 (general), £100,000 (excepted charities)
- annual return and report thresholds: £10,000 and £25,000 respectively
- Company House filing deadline: nine months after the year end
- Charity Commission filing deadline: ten months after the year end.
All charities are encouraged to review their current reporting arrangements, update policies and systems where necessary, and brief trustees on the upcoming changes. While implementation is some way in the future, early preparation will help ensure a smooth transition and continued compliance.
