The Charities Statement of Recommended Practice (SORP) 2026 introduces significant updates to charity accounting and reporting in the UK. Effective for accounting periods beginning on or after 1 January 2026, these changes aim to improve transparency, proportionality, and alignment with updated UK accounting standards. Charities with December year ends will be first affected with 31 December 2026 accounts the first to be subject to the new rules.
Below is an overview of the most important changes:
Introduction of a three-tier reporting regime
To ensure proportionality, SORP 2026 introduces a new tiered structure based on income:
Each tier comes with different disclosure requirements. For example, cash flow statements are now only mandatory for Tier 3 charities, reducing the burden on smaller organisations.
Digital-first reporting and accessibility
With the increasing shift towards digital engagement, the SORP encourages charities to publish annual reports and financial statements in formats optimised for online access. Additional guidance has been provided to ensure these digital documents are fully accessible and adhere to recognised digital accessibility standards.
Enhanced trustees’ annual report
The revised SORP requires charities to provide more comprehensive disclosures regarding the outcomes and impact of their work. Financial reports must now explicitly link the allocation of resources to specific achievements and societal benefits, with the intention of promoting more transparency over how charitable funds are utilised.
As a result, the Trustees’ Annual Report has been significantly expanded. For example:
Enhanced disclosure of reserves policies
Charities are now required to provide more detailed explanations of their reserves policies. This should include the justification for holding reserves at current levels, strategic plans for their use, and the alignment of reserve policies with broader organisational objectives and the charity’s risk register.
Improved risk reporting
The SORP now expects charities to deliver more robust descriptions of principal risks, including their risk mitigation strategies and assessments of the effectiveness of risk management processes. This enhanced disclosure aims to offer a clearer picture of how organisations manage uncertainties and protect charitable assets.
Expanded requirements for grant-making charities
Charities engaged in grant-making must now report in detail on their grant allocation methodologies, assessment procedures, and the monitoring of outcomes. These disclosures will improve accountability and provide assurance to both funders and beneficiaries regarding the effectiveness of grant disbursement.
Enhanced transparency in fundraising practices
To address concerns around fundraising, charities are now required to describe their fundraising approaches in detail, including the use of third-party agencies and the measures in place to safeguard supporters, especially those considered vulnerable.
Income recognition overhaul
Income recognition has been modified to align with the changes from the periodic review of FRS 102 and to align with broader international reporting. While many charity income streams will be unaffected, recognition of exchange transactions, especially those with quantified delivery requirements on the charity, will become more complex. There is also additional guidance on legacy recognition and disclosure, but no actual changes to the existing rules.
Lease accounting
The revised SORP follows the changes to FRS 102 in requiring almost all leases to be treated on balance sheet as finance leases. The underlying asset will be capitalised within Tangible Fixed Assets, with a corresponding lease liability split between creditors falling due within and after one year, and a lease interest charge being recognised in the Statement of Financial Activities. Charities with significant leases may see significant changes and should consider well in advance if any bank covenants or other KPIs will be affected.
Provisions and contingent liabilities
SORP 2026 introduces a dedicated module for provisions, contingent liabilities, and contingent assets, improving clarity and consistency. This includes guidance on accounting for funding commitments.
Social investments
Reporting requirements for social investments have been simplified, aligning definitions with the Charities Act 2011 and making disclosures easier to apply.
Audit and examination thresholds
Although not part of the SORP itself, related changes to audit thresholds are expected in late 2026. Whilst some of the details are still not known the proposal is that:
What should charities do now
Whilst the first year end that will be affected will be the year ended 31 December 2026, charities with a December year end will want to reflect changes to accounting practices, for example in relation to leases, in their management accounts from 1 January 2026. Therefore, at the earliest opportunity charities should now:
As you might expect James Cowper Kreston can assist with the changes especially those relating to ESG disclosures, revenue recognition and the lease accounting calculations. Please look out for our upcoming webinars which will assist you in preparing for the changes.
If you would like to discuss this topic further, then please contact a member of our charities team.
