From 1 January 2026, a new charity reporting framework came into effect - SORP 2026.
While many charities are aware that change is coming, far fewer have taken the time to understand what it actually means for their reporting, governance and financial statements.
The reality?
These changes are not just technical updates, they will affect how charities tell their story, present their finances and demonstrate accountability.
Here are five key changes every charity should understand:
1️⃣ A new tiered reporting structure
SORP 2026 introduces a clearer, income-based structure:
- Tier 1: Under £500k
- Tier 2: £500k – £15m
- Tier 3: Over £15m
This means reporting requirements will now scale more directly with the size of the charity.
Smaller organisations should benefit from simplified reporting, while larger charities will face greater disclosure expectations.
2️⃣ A stronger focus on impact reporting
Financial statements alone are no longer enough.
Charities are now expected to clearly explain:
- What they did
- Who they helped
- The difference they made
This sits within the Trustees’ Annual Report and reflects a wider shift towards transparency and accountability, not just compliance.
3️⃣ Leases may now appear on the balance sheet
This is one of the most overlooked changes.
If your charity leases:
- Buildings
- Office space
- Equipment
These arrangements may now need to be recognised on the balance sheet, potentially increasing both assets and liabilities.
For many organisations, this could significantly change how their financial position looks.
4️⃣ Income recognition may change
Not all income will be treated the same under SORP 2026.
Charities will need to assess whether income is:
- A donation or grant, or
- Payment for goods or services
This distinction can affect when income is recognised, which in turn impacts reported results and performance.
5️⃣ Cash flow statements: not always required but don’t assume
Only larger charities are required to prepare a cash flow statement under SORP.
However, some organisations may still need one due to company law requirements.
It’s important not to assume exemption without checking the wider regulatory context.
So, what should charities do now?
With SORP 2026 already in effect, early preparation is key. Practical first steps include:
✔ Identifying your reporting tier
✔ Reviewing lease arrangements
✔ Assessing contracts, grants and income streams
✔ Updating your Trustees’ Annual Report
SORP 2026 isn’t just a compliance exercise, it’s an opportunity for charities to improve how they communicate their value and impact.
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