SORP 2026: Is it time for smaller charities to simplify their accounts?

By now, many charities are getting to grips with the Statement of Recommended Practice (SORP) 2026.

One key change sees the new rules do away with the previous one-size-fits-all approach and replace it with a three-tier reporting framework based on gross annual income.

The tiers and the reporting expectations that come with them are set out below:

Why has the new tiered system been introduced?

The change is intended to make reporting more proportionate to a charity’s size and for many smaller charities it opens up a genuine choice over how far to simplify their accounts.

A number of related threshold changes are also expected to take effect for year ends on or after 30 September 2026.

The threshold for non-company charities to prepare accruals accounts, rather than the simpler receipts and payments basis, is set to double from £250,000 to £500,000.

The independent examination threshold is expected to rise from £25,000 to £40,000 and a professionally qualified examiner will only be required once income exceeds £500,000, up from £250,000.

What does Tier 1 simplification involve?

For charities with income under £500,000, disclosure requirements under SORP 2026 are noticeably lighter than under the current regime.

Tier 1 charities may present expenditure using natural classifications rather than the activity-based analysis traditionally used.

Smaller organisations without separate cost centres are likely to find this easier both to prepare and to explain to trustees.

Tier 1 charities will generally not be required to prepare a statement of cash flows.

Non-company charities that fall under the new £500,000 threshold will also have the option of moving away from accruals accounts altogether and adopting receipts and payments accounts instead, provided there is no other requirement for them to prepare accruals accounts.

Is simplification the right move for your charity?

Simplifying your accounts will not automatically suit every charity that falls under the threshold.

A few points are worth thinking through before deciding:

• What your funders expect – Banks, funders and major donors may still want to see activity-based reporting or full accruals accounts, whatever the SORP itself requires.
• How tiers are assessed – Tier status under SORP 2026 is based on income alone, with no averaging across two of the last three years as company size thresholds allow. This means a charity’s tier can shift more readily as income rises and falls.
• Comparing accounts year on year – If one year’s accounts are prepared on a simplified basis and the prior year was not, trustees and other readers may find it harder to follow trends.
• The effect on your finance function – Moving to receipts and payments accounts changes what information your accountant, examiner or auditor will need from you and when they will need it.

Getting the balance right

The new £500,000 threshold gives smaller charities a genuine choice, but the right approach depends on your charity’s funders, its plans for growth and how trustees use financial information.

Speak to our team if you are unsure how the changes under SORP 2026 affect your organisation.