Understanding SORP 2026: What You Need To Know

From 1 January 2026, a new accounting and reporting framework called SORP 2026 (the Charities Statement of Recommended Practice) applied to how charities record and present their financial information. This update affects charities in the UK that prepare accruals accounts — that is, where income and expenses are recorded when they are earned or incurred, not just when cash changes hands. You can read full details of this here.

SORP 2026 is a significant refresh aimed at making charity reporting more proportionate, transparent and understandable for donors, trustees, regulators and the public. It’s not just about compliance — it’s a chance to strengthen your charity’s financial storytelling, accountability and trust with your community.

We’ve brought together the key information that your organisation needs to know.

What Is the SORP ?

The SORP provides guidance on how charities should apply UK accounting standards so that accounts give a true and fair view of a charity’s financial position and activities.

It has been updated to reflect changes in financial reporting standards and charity law — and SORP 2026 replaces the current framework for accounting periods starting on or after 1 January 2026. For many grassroots or volunteer-led charities, this might be the first time the reporting expectations feel more structured — but it’s designed to be proportionate to your charity’s size and impact.

Key Changes in SORP 2026

Here are the most important updates:

1. Three-Tier Reporting System

Charities will be grouped into three tiers based on income, meaning the level of reporting detail increases with size:

Tier 1: Income up to £500,000

Tier 2: Income between £500,001 and £15 million

Tier 3: Income over £15 million

This tiered system is designed to make reporting proportionate and fair — smaller charities won’t be weighed down with the same requirements as larger ones. For example, only larger charities will need to prepare a detailed cash flow statement – but they will also have new sustainability and ESG requirements.

Read the full details and find out the implications for your Tier here: Changes to charity accounting and reporting – GOV.UK

2. Updated Income & Lease Accounting Rules

SORP 2026 introduces new ways charities must recognise some types of income and account for leases. Many operating leases (e.g. rented buildings or equipment) will now be shown on the balance sheet, which can affect how reserves and liabilities look. This is probably the most significant adjustment for charities under the new guidance.

Lease accounting will affect those charities who lease premises or assets. This could include mosques or community centres or even charity shops where rent may be very minimal. This change will impact your existing balance sheet structure and will need to be taken account of in your income and expenditure accounts each year.

Income recognition will include where charities earn income for delivering services – such as mental health services, counselling or care – including referral schemes. It will also include how you report your grant funding or any donation with a condition attached to it, including contracts. If this applies to your charity you will need to determine when and how much revenue to recognise from your income. This may impact your surpluses and reserves.

These changes could impact reserve policies, banking covenants, and even whether a charity requires an audit or can opt for an independent examination – so it’s best to start considering how this affects you now. It is also worth noting that from 30th September 2026, audit and independent examination criteria are expected to rise.

3. Trustees’ Annual Report Refresh

Trustees’ reports will include clearer guidance on how to explain financial reserves, future plans, and activities — including impact reporting, environmental and social performance, and governance. This helps donors and communities understand not just the numbers but the story behind them.

What Your Organisation Should Do To Prepare:

1. Identify Your Reporting Tier
Work out which tier your charity falls into based on your latest income figures — this determines your reporting requirements.

2. Review Your Accounting Practices
If you prepare accruals accounts, start reviewing how income, leases and social investments are reported in your current accounts — you may need to adjust how you recognise some transactions.

3. Prepare Your Trustees’ Annual Report Templates
Updating your report templates now to include questions on reserves, future plans and community impact will save last-minute stress later.

4. Train Your Team or Volunteers
Make sure trustees, staff and volunteers involved in finance understand the new rules and why they matter. Training — even a short internal workshop — can make compliance much smoother.

5. Seek Support
Don’t hesitate to speak with your accountant, independent examiner, or get in touch with the team at MCF [email protected]