The Charities SORP published on 31 October 2025 applies to accounting periods beginning on or after 1 January 2026. For a charity with a December year end, that means the accounts you are preparing now. For a March year end, the year ending 31 March 2027.
Either way, the comparative figures have to work, so the practical deadline has already passed for the decisions that matter.
What is the three-tier framework?
SORP 2026 scales reporting to size, which is the most welcome structural change in years:
- Tier 1 — gross income up to £500,000. Simplified disclosure, but still full accruals accounting
- Tier 2 — gross income between £500,000 and £15 million. The standard requirements
- Tier 3 — gross income above £15 million. The fullest disclosure, including mandatory reporting on how the charity manages environmental, social and governance matters
Charities preparing receipts and payments accounts do not follow the SORP and are unaffected — a point worth noting alongside the separate threshold changes taking effect on 30 September 2026, which allow more charities in England and Wales to choose that route.
Why are leases the biggest issue?
Because they change the balance sheet without anything changing in the charity.
SORP 2026 incorporates the FRS 102 periodic review, under which most operating leases are recognised as a right-of-use asset with a matching liability. A charity leasing premises, vehicles or significant equipment will report materially higher total assets and total liabilities than in the prior year.
Three consequences follow, and only the first is an accounting one:
- your reserves position and key ratios will look different, and the trustees’ annual report will need to explain why
- loan covenants and funder conditions expressed as balance sheet tests may be affected
- for charitable companies, the balance sheet total is one of the tests that determines audit eligibility
That last point catches people. A charity that comfortably claimed audit exemption may find the arithmetic has changed.
What is changing about income recognition?
SORP 2026 introduces a five-step revenue model and draws a clearer line between exchange transactions, where the charity provides something in return, and non-exchange transactions such as donations and most grants.
Income with performance conditions is recognised when those conditions are met, rather than on receipt or on becoming legally entitled. For grant-funded charities running multi-year programmes, this can move significant income between years and make a healthy year look lean, or the reverse.
There is also new guidance on legacies and on volunteers, with fuller disclosure expected at the higher tiers.
What do trustees actually need to do?
Establish your tier, and do it from gross income rather than from what feels proportionate.
Inventory your leases. Every property, vehicle and equipment lease needs identifying, with the term and payment profile, before anyone can calculate a right-of-use asset.
Model the balance sheet impact before the year end rather than after, particularly if you are near an audit threshold or subject to funder covenants.
Review the trustees’ annual report requirements. Impact reporting is now expected of all charities, not just the largest, and the reserves policy and going concern disclosures have been strengthened.
Charities that treat this as a technical exercise for the accountant will get compliant accounts and a difficult trustee meeting. Charities that engage early get to explain the numbers on their own terms.
Frequently asked questions
When does Charities SORP 2026 first apply?
To accounting periods beginning on or after 1 January 2026. A charity with a 31 December year end applies it for the year ending 31 December 2026; a 31 March year end applies it for the year ending 31 March 2027. Comparative figures must be restated, so the transition affects the prior year too.
Which tier is my charity in?
Tier 1 covers gross income up to £500,000, Tier 2 covers £500,000 to £15 million, and Tier 3 covers income above £15 million. Disclosure requirements increase with each tier, with ESG reporting mandatory only at Tier 3.
Does SORP 2026 apply to receipts and payments accounts?
No. The SORP governs accruals accounts only. Separately, from 30 September 2026 the income threshold for preparing accruals accounts in England and Wales rises from £250,000 to £500,000, so more charities can choose receipts and payments instead.
Could the lease changes push my charity into audit?
Potentially. Recognising right-of-use assets increases the balance sheet total, which is one of the size tests for charitable companies. A charity that has always claimed audit exemption should recalculate rather than assume, particularly where it leases property.
Is impact reporting now compulsory?
The trustees’ annual report requirements have been strengthened across all tiers, with a clearer expectation that charities explain the difference their work made rather than list the activities undertaken. All charities must also address future plans and going concern.