The new Charities Statement of Recommended Practice (SORP) 2026 was officially released on 31 October 2025 and will apply to all charities preparing accruals accounts for reporting periods beginning on or after 1 January 2026.
This update brings significant developments aimed at improving transparency, proportionality, and relevance in charity financial reporting.
What’s changing?
1. Income and lease arrangements
The SORP introduces updated accounting guidance for income recognition and lease arrangements, supported by new practical examples to assist charities in applying the rules consistently. This aligns with the changes to FRS 102.
2. Proportionate reporting through new tiers
A new three-tier structure has been introduced to ensure that reporting requirements are proportionate to a charity’s size:
- Tier 1: Income up to £500,000
- Tier 2: Income between £500,000 and £15 million
- Tier 3: Income over £15 million
As an example, only Tier 3 charities will be required to produce a Statement of cash flows.
3. Trustees’ Annual Reports
Requirements have been refreshed, with additional guidance on reporting reserves, future plans, and areas of growing public interest such as impact reporting and environmental, social and governance (ESG) matters.
4. Social investments
Accounting and reporting requirements for social investments have been simplified to make disclosures clearer and easier to apply.
5. Provisions and contingencies
Revisions have been made to simplify how charities report provisions and contingencies, improving consistency and understanding across the sector.
The final version of Charities SORP 2026 has now been published, giving charities clear guidance on what is required for financial reporting. These updates are significant and will bring major changes to how charities report their finances, so it’s important to take them seriously.
Charities are responsible for making sure they comply with the new rules, especially the five-step model for recognising revenue and the updated approach to lease accounting.
The new requirements apply to accounting periods starting on or after 1 January 2026. While early adoption is allowed, most charities are expected to implement the changes for year ends in December 2026 and beyond.
To prepare, charities should review their leases and contracts as soon as possible. This will help them understand the impact of the changes and allow enough time to make any necessary adjustments before the new rules take effect.
Our specialist charity team can help you understand what the changes mean for your organisation and ensure a smooth transition to SORP 2026.
If you have any questions or would like tailored advice, please get in touch with your usual Hillier Hopkins contact or reach out to our Charities team.
