And it’s here!

Following the consultation over summer 2025, the new Charities SORP has now been released. SORP 2026 takes effect for accounting periods beginning on or after 1 January 2026.

The new SORP reflects two major changes to UK accounting standards, lease accounting and revenue recognition, as well as other changes in legislation and sector specific stakeholder feedback.

Key changes include:

• A new three-tier reporting regime based on income, each accompanied by differing levels of disclosure requirements:
  • Tier 1: Charities with income up to £500,000
  • Tier 2: Income between £500,000 and £15 million
  • Tier 3: Income over £15 million
• Enhanced Trustees’ Annual Report disclosures including:
  • Charities in all tiers must include impact reporting.
  • There is a new sustainability section, with charities in tier 3 now required to report on environmental, governance, and social matters. Those charities in tiers 1 and 2 may choose to do so and are encouraged to consider their stakeholders when deciding whether or not to include such disclosures.
  • Tiers 2 and 3 charities should include an explanation of material legacy income that has been recognised in the accounts but not received.
  • Future plans becomes a requirement for all charities.
  • Any charity that is not holding reserves or has a negative net assets on its balance sheet must explain why it is still operating as a going concern.
• Additional guidance on income recognition, with the module now split into two separate sections on exchange transactions (e.g. contract income – including the new 5-step revenue recognition model for income from exchange transactions) and non-exchange transactions (e.g. donations and grants). The performance model remains mandatory for grant income recognition.
• A new module covering provisions, contingent liabilities and assets, including accounting for funding commitments.
• A new module on lease accounting following the significant changes within FRS10. This new module provides guidance on identifying leases, identifying short-term or low-value leases that may qualify for simplification, and guidance on nominal or peppercorn arrangements.
• Cash flow statements will no longer be required for charities with income under £15 million, i.e. those in tiers 1 and 3, unless a cash flow statement is still required under FRS102.
• Clarified guidance on measuring the value of donated heritage assets.
• Simplification of social investments into one new category where previously such investments were split between programme related investments and mixed motive investments.The SORP also includes an appendix on charity law thresholds (including the audit threshold), and an appendix summarising the changes in the new SORP on a module-by-module basis.

It’s important that all charities review the new SORP carefully as there are some significant changes and the effective implementation date is close.

If you’d like any support in understanding the changes and how they may impact your charity, then please do get in touch.