Charity SORP 2026 released

The Charity SORP Committee released the 2026 Statement of Recommended Practice (SORP) in October, following a public consultation on draft proposals featuring a number of significant changes to charity financial reporting.

One of the most notable changes is the introduction of a three-tier reporting framework based on charity size, which aims to reduce the burden on smaller charities while maintaining transparency and accountability. The tier system drew a substantial amount of focus in the original consultation, with respondents both keen to ensure that the bands were set at the right levels and generating considerable dialogue around whether the tiers should be named in ascending or descending order, to ensure that the system is clearly understood. In the end, the following outcome was agreed upon; tier 1 entities (charities with less than £500k in income) will be permitted to apply simplified accruals accounting and reduced disclosures. Tier 2 (comprising bodies with income between £500k and £15m) will be expected to comply with all tier 1 requirements, as well as some additional disclosures. The remainder will fall into a third tier, which will require compliance with tiers 1 and 2, as well as enhanced narrative reporting on sustainability, governance and social impact.

The SORP also introduces further significant updates beyond tiered reporting and FRS 102 alignment. A major focus is on fund accounting clarity: charities must now provide enhanced disclosures on the nature and purpose of funds, including clearer explanations of restrictions and transfers between funds. Guidance strengthens transparency around designated funds and endowments, with improved requirements for reporting total return investments. The SORP also updates grant-making disclosures, heritage asset accounting, and related party transactions. Going concern reporting is reinforced, requiring trustees to provide a more explicit assessment of financial sustainability and any material uncertainties. Impact reporting becomes mandatory in Trustees’ Annual Reports, covering environmental, social, and governance matters. Overall, these changes aim to improve accountability and comparability across charity financial statements.

The revised SORP also includes several changes to the accounting treatment of key items such as leases and contracts with customers, in order to align the document with the underlying reporting framework, FRS 102. These changes are discussed in detail below.

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If you have any questions, then please feel free to get in touch with Michaela Johns on 023 8046 1256 or email Michaela Johns.