For many charities, the upcoming changes to the Charities SORP represent the most significant shift in financial reporting for over a decade.

Effective for accounting periods beginning on or after 1 January 2026, with many organisations first impacted at their year end, the new SORP is not simply a technical update.

It signals a broader evolution in how charities are expected to communicate performance, demonstrate impact, and evidence stewardship of funds.

Beyond compliance: what’s really changing  because of the Charities SORP?

At a surface level, the new Charities SORP introduces a number of structural and accounting changes, including:

• A new tiered reporting framework
• Expanded Trustees’ Report requirements
• A revised revenue recognition model
• Significant updates to lease accounting

But taken together, these changes point to something more fundamental: a move towards clearer, more consistent, and more transparent reporting that aligns financial performance with real-world impact.

In practice, this means charities will need to go beyond explaining what they spend and start demonstrating what that spend achieves.

A more segmented reporting environment

One of the most visible changes is the introduction of three reporting tiers, based on income:

• Tier 1: Up to £500,000
• Tier 2: £500,000 to £15 million
• Tier 3: Over £15 million

This is not just an administrative classification. The tier you fall into will directly shape:

• The depth of disclosures required
• The expectations placed on trustees
• The level of scrutiny from regulators, funders and stakeholders

For growing charities in particular, this introduces a new dynamic. Crossing a threshold isn’t just a financial milestone, it can trigger a step change in reporting expectations, there may be additional reporting requirements if moving up a tier. It is important to note that statutory requirements such as audit and independent examination thresholds are determined by charity law and regulation, not by the tier itself.

Raising expectations of trustees and leadership

The Trustees’ Report is where one of the most noticeable shifts will be felt.

Historically, many reports have focused on activities undertaken during the year. Under SORP 2026, the emphasis moves firmly towards:

• Strategic clarity – what the charity set out to achieve
• Operational delivery – what it actually did
• Measured outcomes – the difference those activities made

This elevates the Trustees’ Report from a compliance document to a central component of stakeholder communication.

Impact reporting moves centre stage

One of the most important developments in the charities SORP is the shift towards mandatory, structured impact reporting.

Charities must now address:

• How their work has improved the circumstances of beneficiaries
• Whether they have delivered wider benefits to society

They must also explain:

• How effectively activities were delivered
• The extent to which outcomes aligned with objectives
• The likely longer-term impact of their work

This represents a clear move away from narrative descriptions towards evidence-based reporting.

For many organisations, the challenge will not be willingness to report impact, but the ability to:

• Define meaningful measures
• Capture reliable data
• Link financial inputs to outcomes

Financial reporting becomes more aligned and comparable

Alongside narrative changes, several updates aim to improve consistency across financial reporting.

Revenue recognition

A structured five-step model for exchange transactions will require charities to:

• Assess contracts more carefully
• Identify performance obligations
• Recognise income in line with delivery

While non-exchange income (such as grants and legacies) remains broadly unchanged, additional clarity will reduce inconsistency in areas such as:

• Performance conditions
• The timing of income recognition
• Treatment of legacy income

The overall direction is clear: income recognition must better reflect economic reality.

Lease accounting: a significant balance sheet impact

Updated lease accounting rules represent one of the most technical, but also most visible, changes.

Under the new approach:

• Charities will recognise a right-of-use asset and a corresponding lease liability for most leases
• The distinction between operating and finance leases is removed (for lessees)
• Rent expense is replaced by depreciation and finance costs

This will have several implications:

• Balance sheets assets may increase significantly
• Reported surpluses may become more volatile
• Key ratios used by funders and stakeholders may shift

Although exemptions exist for short-term and low-value leases, many charities will still experience a material change in how their financial position is presented.

Audit thresholds and proportionality

Updated audit thresholds will also affect some organisations.

For accounting periods ending on or after 30 September 2026, an audit is required where:

• Income exceeds £1.5 million, or
• Assets exceed £5 million and income exceeds £500,000

At the same time, there is some simplification. For example, cashflow statements are only required for tier 3 charities, unless otherwise required by legislation.

This reflects an attempt to balance increased transparency with proportional reporting requirements.

Greater scrutiny of financial resilience

The financial review section of the Trustees’ Report is also strengthened, particularly around reserves and risk.

Charities must now:

• Clearly reconcile reserves reported in the Trustees’ Report to the accounts
• Explain how reserves align with policy
• Set out plans where reserves are outside target levels

At the same time, risk reporting is broadened, with explicit reference to:

• Environmental risks
• Cyber risks

This reflects increasing expectations that charities demonstrate not only current performance, but future resilience and preparedness.

What the Charities SORP means in practice

While implementation may feel some way off, the practical reality is that many charities will need to start preparing now.

Key areas of focus include:

1. Data and systems

Do you currently capture the information needed to evidence impact and performance?

2. Internal alignment

Do trustees, finance teams, and operational leads share a common understanding of objectives and outcomes?

3. Contracts and income streams

Are your income arrangements clearly documented and understood under the new model?

4. Property and leases

Have you assessed the impact of bringing lease liabilities onto your balance sheet?

A strategic opportunity, not just a compliance exercise. It would be easy to view SORP 2026 as another layer of regulatory complexity.

However, for charities willing to engage fully, it presents a genuine opportunity to:

• Tell a clearer and more compelling story
• Strengthen engagement with funders and stakeholders
• Demonstrate value in a more structured and credible way

In many cases, the charities that benefit most will be those that treat the new SORP not as a reporting burden, but as a framework for sharper strategy and better communication.

2026 Charities SORP: What comes next?

In the rest of this series, we will explore each area in more detail:

• Tiered reporting and what it means for growing charities
• How to approach Trustees’ Reports and impact reporting in practice
• Revenue recognition and common pitfalls
• Lease accounting and its real-world implications
• Strengthening reserves and risk reporting

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