Beyond Compliance: How Trustees Can Turn the 2026 SORP into a Strategic Advantage
Stuart McKay · Posted on: November 21st 2025 · read
The 2026 Charities SORP, effective for reporting periods beginning on or after 1 January 2026, introduces the most significant changes since 2019. It reflects updates to FRS 102 and moves charity reporting towards greater transparency, accountability, and impact. For trustees, this is a big change in how charities narrate their story and a challenge to enhance transparency and trust.
Why It Is Important
The SORP underpins charity accounting across the UK and Ireland. The new framework introduces three major developments: a move from two tiers to three tiers of reporting, expanded requirements for the Trustees’ Annual Report (TAR), and substantial changes in income recognition and lease accounting. These changes will affect governance, financial planning, and stakeholder confidence, rendering early preparation essential.
Key Changes Trustees Need to Be Aware
- Tiered Reporting Charities will now fall into three tiers: Tier 1 for those with income up to £500,000, Tier 2 for charities with income between £500,000 and £15 million, and Tier 3 for those above £15 million. Each tier carries different obligations, particularly in the TAR and financial statements, so trustees need to understand where their organisation sits and what additional disclosures will be required.
- Trustees’ Annual Report The TAR is evolving into a more strategic document. Trustees must now provide a clear definition of reserves and reconcile these figures with the accounts, explaining any designations and addressing going concern if reserves are nil. Reporting on volunteer contributions becomes mandatory for Tier 1 charities, while impact reporting is required for Tiers 2 and 3, with Tier 3 also introducing ESG disclosures. All charities must outline their short- and long-term objectives and plans, and risk reporting will now include environmental and cyber risks alongside ethical considerations in investment policies.
- Accounting Policy Changes Income recognition will no longer rely on the old “entitlement, probable, measurable” test. Instead, exchange transactions will follow a five-step model focusing on contracts, obligations, pricing, and performance, while non-exchange transactions such as gifts, grants, and legacies will be recognised when receivable and measurable. Lease accounting undergoes a major shift, with all leases appearing on the balance sheet and requiring calculation of right-of-use assets and liabilities. Other updates include changes to heritage assets, social investments, and ex-gratia disclosures.
Actions for Trustees
Trustees should begin by reviewing their reserves policy to ensure it supports going concern disclosures. Planning for impact reporting is critical, and charities may need new systems to capture beneficiary outcomes effectively. Tier 3 organisations should familiarise themselves with ESG expectations and consider which frameworks best fit their governance approach. Engaging early with auditors on lease accounting and income recognition changes will help avoid surprises, and trustees should also explore transitional options and practical expedients to ease implementation.
The Opportunity
"These changes clearly represent an opportunity to strengthen governance, improve transparency, and demonstrate the difference your charity makes. Trustees should start conversations now about reserves, reporting systems, and future plans to ensure a smooth transition."
Understanding the charities’ new landscape and navigating these changes may feel challenging, but with early planning and the right advice, trustees can lead their organisations confidently. Our team understands those changes and is here to support you along the journey.
