Since 1 January 2026, the new charities Statement of Recommended Practice (SORP) has come into effect.

This has brought some of the biggest changes in charity accounting and reporting in recent years. Trustees are responsible for remaining compliant and should make sure that their processes are up to date.

The changes to the SORP will affect how charities recognise income, present liabilities, explain their impact and prove accountability to funders and regulators.

What are the new reporting tiers under SORP 2026?

The charities SORP 2026 introduces three reporting tiers:

  • Tier 1 – Gross income up to £500,000
  • Tier 2 – Gross income between £500,000 to £15 million
  • Tier 3 – Gross income over £15 million

As charities move up the tiers, the level of financial disclosure increases.

Trustees should know that the assessment is based on income for each reporting year and a change in income can create additional reporting requirements immediately.

How is income recognised?

The new SORP includes a five-step income recognition model, where income will be acknowledged when performance obligations are met

For charities with service contracts, performance-related grants or conditional funding, this could alter when income appears in their accounts.

Trustees should understand how this will affect funding arrangements and how changes in timing may affect reported surpluses or deficits.

How is lease accounting for charities affected?

Under SORP 2026, most leases must now be recognised as an asset and a liability.

This includes leases for property, vehicles and equipment that were previously treated as operating costs.

This will increase balance sheet liabilities for many charities and may affect metrics and reserves calculations.

Exemptions do exist for short-term and low-value leases, but trustees should still review their lease arrangements to assess whether they are affected.

What is included in the Trustees’ Annual Report?

The Trustees’ Annual Report is receiving increased scrutiny under the new SORP.

Trustees must clearly explain:

  • The charity’s impact and achievements
  • How volunteers contribute to the work
  • The main risks and future plans
  • How reserves are managed
  • Environmental and sustainability changes (particularly for larger charities)

This will show clear governance on how charities are run and what they are achieving.

What has changed in provisions and social investments?

SORP 2026 provides clearer guidance on when provisions must be recognised, particularly for multi-year grant commitments or lease-related obligations.

This could mean that liabilities may need to be recorded earlier than before.

There is also more detailed guidance on social investments, such as concessionary loans and programme-related investments.

Trustees should ensure these are correctly classified and valued under the new rules.

What should trustees be doing now?

Trustees should be acting now and taking the right steps to stay compliant, including:

  • Confirming the charity’s reporting tier
  • Reviewing income streams and funding agreements
  • Spotting leases that will now appear on the balance sheet
  • Reassessing provisions and long-term commitments
  • Updating the Trustees’ Annual Report structure
  • Reviewing the treatment of social investments and fund categories

How can we support you with SORP 2026?

The new SORP has introduced further reporting requirements and charities and trustees must ensure they are remaining compliant.

Our professional team can help your charity understand the rules, model their financial impact, update accounting policies and support trustees in making informed decisions.

We can support you with your financial and reporting duties so you can focus on delivering your charity’s mission.

For further support or advice on how the SORP changes affect you, contact our team.