If your charity prepares accruals accounts, it’s important to be aware of the Charities Statement of Recommended Practice 2026 (SORP 2026) which sets out updated guidance on how to prepare your annual reports and financial statements.
SORP 2026 replaces the previous SORP and reflects applicable in the UK – including updates to income recognition and lease accounting.
The new SORP was published on 31 October 2025 and applies to accounting periods starting on or after 1 January 2026 (31 December 2026 year ends for most charities).
Read on for our summary of the main features & key changes.
Three-tier reporting regime
SORP 2026 introduces a three-tier reporting structure based on a charity’s income, so that reporting requirements are proportionate to the size of your charity.
- Tier 1: Income up to £500,000
- Tier 2: Income between £500,001 and £15 million
- Tier 3: Income over £15 million
Larger charities are required to provide more detailed disclosures, while smaller charities benefit from simpler reporting requirements with fewer narrative and disclosure obligations.
Improved trustees’ annual report requirements
The updated guidance places more emphasis on clear and transparent narrative reporting. This includes:
- Clear links between the trustees’ report and the financial statements
- Simple explanations of reserves, future plans, and the impact of your charity’s activities
- Information on the contribution made by volunteers
- More detail on impact and environmental, social and governance (ESG) matters where these are relevant to your charity’s stakeholders
Lease accounting
SORP 2026 reflects recent changes to FRS 102 and requires most leases to be shown on the balance sheet. This means charities will need to:
- Recognise leased assets and the related lease liabilities, making lease commitments clearer
- Consider whether any leases qualify for low-value or short-term exemptions
- Assess whether nominal or peppercorn leases should be treated as donated assets rather than leases
Revenue (income) recognition
SORP 2026 updates how charities recognise income, bringing it in line with FRS 102. Charities will need to:
- Identify contracts and what they are required to deliver
- Decide how much income should be recognised
- Recognise income as services or obligations are delivered
- Clearly explain when and how much income is recognised, particularly for contract and service income
This is an important change for charities that earn income from contracts or service fees.
Other reporting enhancements
SORP 2026 also includes several wider reporting updates, such as:
- Clearer guidance on provisions and contingent assets and liabilities
- Simpler reporting requirements for social investments
- Improved guidance on how to disclose accounting policies, estimates, and prior-year errors
How we can help
We understand that keeping up with accounting and reporting changes, alongside the day-to-day running of a charity, can be challenging. Our charities and not-for-profit specialists are here to help you understand what the new requirements mean for your charity and to ensure your accounts remain accurate and compliant.
Please speak with your regular BKL contact or Ed Passmore using the form below.
