Charities Statement of Recommended Practice (SORP): Key changes for Trustees to be aware off.

From 1 January 2026, the new Charities Statement of Recommended Practice (SORP), aligned with FRS 102, officially came into effect. This marked a significant change in how UK charities report their finances, with changes around income recognition, lease accounting, and narrative reporting.

If you're a trustee, this isn't just something for the finance team to handle. The updated SORP affects how your charity presents its work, manages risk, and demonstrates accountability. It matters to funders, the public, and your fellow board members.

What are the main changes in the Charities SORP 2026?

Some of the key changes that have come into effect in the charities SORP 2026 include:

• A new three-tier reporting structure based on charity income
• Updated income recognition using a five-step model
• Lease liabilities will in most cases appear on the balance sheet
• More detailed requirements for Trustees’ Annual Reports
• New guidance on social investments and provisions
• Changes to fund accounting, heritage assets and audit thresholds

Which reporting tier does your charity fall under?

SORP 2026 introduced a new tiered system to make reporting more proportionate:

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

The higher your tier, the more detail is required in your financial and narrative reporting. You should also consider the income requirements each year as there is no exemption akin to the companies act thresholds where criteria are assessed for two out of three thresholds over consecutive years.

How will income recognition change under the new charity SORP?

The 2026 charities SORP introduces a five-step approach for recognising income, aligning more with closely with international standards.

That means some income may need to be deferred until services are delivered, while other income could potentially be recognised earlier than before. Performance obligations delivery is key under the new SORP.

As a trustee, it’s important to understand how this could impact your charity’s reported results, especially if you are in regular receipt of performance-related contracts or grants.

How does the charities SORP 2026 change lease accounting for charities?

Most leases will need to be recorded as both assets and liabilities in your accounts. This applies to rented properties, vehicles, and equipment.

For most charities, operating leases were previously shown as annual expenses through the Statement of Financial Activities (SOFA). Bringing them onto the balance sheet could impact KPI’s so the technical considerations should be considered. There are some exemptions available for very short time and low value leases.

What should go into the Trustees’ Annual Report under the new SORP?

SORP 2026 places much more focus on the narrative aspects of the report. Trustees are expected to detail:

• The charity’s impact and achievements
• How volunteers support the work
• Key risks and forward-looking plans
• How reserves are managed
• Environmental and sustainability activity (especially for larger charities)

This is your opportunity to clearly show how the charity is run and what it is achieving. For larger charities (Tiers 2 and 3), the requirements become more structured, but all charities will benefit from improving their reporting.

When do charities need to record provisions under the new SORP?

The 2026 charities SORP introduces clearer guidance on provisions and contingent liabilities. If your charity makes multi-year grant pledges or has obligations at the end of a lease, these may now need to be recorded earlier than previously.

This could bring forward liabilities that were previously disclosed only in the notes rather than the balance sheet.

What are the rules around social investments?

If your charity holds social investments such as concessionary loans or programme-related investments, SORP 2026 provides more specific guidance.

It’s important to check how these investments are currently recorded and whether changes to valuation or classification will impact your charity.

Other updates

Alongside the headline changes, there are a few other points trustees should be aware of:

• Fund accounting: Clearer guidance on restricted, designated, and endowment funds
• Cash flow statements: These are now only required for Tier 3 charities and those that do not qualify as a ‘small entity’.
• Heritage assets: Updated rules for donated heritage assets, particularly for museums or religious organisations
• Audit and independent examination thresholds: Some thresholds will be changing with the new ones intended to come into force on or after 1^st October 2026. See new audit thresholds here.

Why this matters for trustees

These updates are not just about getting the numbers right. They’re about improving clarity, building public trust, and strengthening governance. Trustees, have a key role to play in making sure the charity is prepared well in advance of its first reporting period under the new SORP.

Start by reviewing your reporting tier, understanding the impact of the lease and income changes, and check that your Trustees’ Report still tells the full story.

If you’d like support reviewing what this means for your charity, we’re always happy to help.

Trustee checklist: Are you ready for the Charities SORP 2026?

✅ Have you confirmed which reporting tier you fall under?
✅ Are you clear on how contract income and legacies will be recognised?
✅ Do you understand which leases must now be on the balance sheet?
✅ Have you reviewed provisions and long-term funding commitments?
✅ Does your Trustees’ Annual Report explain your impact, risks, and reserves policy?
✅ Do you hold social investments, and are they reported correctly?
✅ Are your fund categories clearly defined and disclosed?

You can read the full Charities SORP FRS102 2026 guidance here:
https://www.charitysorp.org/documents/d/guest/charities-sorp-2026-1

Related content