Green Accountancy newsletter – Charities SORP 2026: what’s changing and what you need to know
The Charities SORP 2026 introduces a new structure and reporting framework designed to make financial reporting more proportionate and easier to understand, especially for smaller charities. Here’s a summary of the key updates that may affect you.
Modular structure and tiered reporting
SORP 2026 is organised into modules, each covering a specific area of charity accounting. A new tiered reporting system has been introduced:
- Tier 1: Charities with income up to £500,000
- Tier 2: Income between £500,000 and £15 million
- Tier 3: Income over £15 million
Smaller charities in Tier 1 will benefit from reduced reporting requirements, while still maintaining transparency and accountability.
Key module changes relevant to smaller charities
- Trustees’ annual report: All charities must now include impact reporting. ESG (environmental, social and governance) disclosures are encouraged but not mandatory for Tier 1.
- Fund accounting: Updated to reflect legislative changes and simplify fund classification.
- Accounting policies and principles: More guidance on going concern and consistency with FRS 102.
- Income recognition: Introduces clearer rules for grants and donations, including a 5-step model for recognising income.
- Expenses and provisions: A new module (10A) separates provisions and contingent liabilities for clarity.
- Cash flow statement: Only Tier 3 charities (income over £15 million) are required to prepare a cash flow statement under SORP. Smaller charities may still need to prepare one under FRS 102 if they don’t qualify as a small entity.
Most other modules have limited or editorial changes aimed at improving clarity and usability.
Audit threshold changes
To ease the burden on smaller charities, the following thresholds will increase:
- Income audit threshold: £1.5 million (up from £1 million)
- Balance sheet audit threshold: £5 million in assets and £500,000 income (up from £3.26 million and £250,000)
- Independent examination income threshold: £40,000 (up from £25,000)
These changes are not expected to come into effect until at least 1 October 2026, and will be accompanied by updated Charity Commission guidance.
Implementation timeline
- SORP 2026 applies to accounting periods starting on or after 1 January 2026
- Audit threshold changes expected from 1 October 2026
How we can help
At Green Accountancy, we specialise in supporting small charities. We can help you:
- Understand which tier applies to your charity
- Review your reporting and accounting practices
- Prepare for new disclosures and requirements
If you would like to discuss your company’s financial setup or ongoing compliance in more detail, please feel free to contact us or book a free online meeting.