The new Charities SORP was released on 31 October 2025, and it represents one of the most significant updates to charity reporting in recent years. Building on the updated FRS 102 framework, the SORP aims to simplify and modernise reporting while improving transparency for funders, regulators, and the public.
There are many changes between the new and previous SORP, too many to detail in this publication, and like with previous SORP it might be that additional information sheets and update bulletins are issued as the new SORP begins being used in practice and fed back upon, but detailed below are a summary of the most significant changes:
A new three-tier structure will classify charities by gross income:
- Tier 1 – up to £500,000
- Tier 2 – £500,000 to £15 million
- Tier 3 – above £15 million
This tiered approach introduces proportionate reporting requirements, recognising that smaller organisations often lack the resources to meet complex disclosure requirements. Larger entities, however, will face expanded expectations for governance and narrative reporting.
- Revenue recognition is also changing. The revised SORP introduces a five-step model for recognising income from contracts with customers, bringing the sector closer in line with commercial accounting practices. Non-exchange income such as donations, legacies, and grants will remain under existing guidance but may require clearer disclosure.
- Lease accounting presents another major shift. Under the new rules, most operating leases will move onto the balance sheet, meaning charities must recognise both a right-of-use asset and a lease liability. This change could significantly affect balance sheets, particularly for organisations with extensive property portfolios or vehicle leases. Trustees will need to consider how these adjustments impact key ratios, reserves policies, and banking covenants.
- Narrative reporting requirements are being strengthened. Tier 3 charities in particular will need to expand disclosures on strategy, sustainability, volunteer contributions, and performance measurement. Trustees’ Annual Reports will play a greater role in communicating impact and stewardship, reinforcing public trust.
The new SORP is applicable to the accounts of relevant charities for reporting periods beginning on or after 1 January 2026. To prepare, charities should identify their tier, review lease agreements and income streams, and engage early with auditors or examiners. Finance teams should receive training on transition adjustments and comparative data requirements. Updating governance documents and report templates now will ensure smoother compliance once the SORP becomes mandatory.
While the revised SORP adds complexity, it also offers an opportunity to align reporting more closely with mission delivery and impact. Proactive preparation will help charities demonstrate accountability and readiness for the future.
Our team has developed a webinar series regarding changes that will affect the charities’ landscape. You can find all the available resources in our Trustees Hub.
Shape our next online session early next year
Now that we’ve explained the theory behind the new SORP changes, we want to hear from you. Our upcoming session will focus on practical worked examples of the changes to leases and revenue.
Pre-register your interest today and help shape the content of this session. Share your questions and ideas when you sign up and we’ll use your input to make the webinar as relevant and useful as possible: Practical Work Examples on Charities SORP Changes – Fill in form.
New Charity Governance Code
The release of the new Charities SORP was swiftly followed by the release of the new Charity Governance Code.
Whilst compliance with the Code, which sets out universal principles of governance for charities, is not a regulatory requirement, it is a practical tool for trustees and when followed helps encourage discussion about standards, behaviours and processes which cultivate good governance. The revised Code underwent public consultation in 2024 and is considered by many in the sector to represent an evolution not a fundamental revolution.
Features of the new code compared to the previous iteration are detailed below:
- The 2020 version of the Code for small charities was made up of seven principles which built on the assumption that a charity is meeting its legal and regularity responsibilities as a ‘foundation’. The 2025 version has removed this assumption by adding the ‘Foundation’ as an eighth principle. A subtle but important change, the formalisation of this principle makes some of the basic expectations of trustees – such as knowing their legal role, continuous learning, putting the charity’s interests first – more explicit.
- The former ‘Decision making, risk and control’ principle has been split in two: ‘Decision making’ and ‘Managing resources and risks’. This arguably requires trustees to have more focused conversations in these areas.
- ‘Equity’ replaces ‘Equality’ in the EDI principle, reflecting the evolution in understanding of these principles in recent years.
- Greater emphasis has been put on trustee behaviours (for example: curiosity, continuous learning, openness, confidentiality, recognising conflict) and culture, as part of the new ‘Ethics and culture’ principle which replaces the former ‘Integrity’ principle.
It is this greater emphasis on trustee behaviours, noted above, which is demonstrable in the structural presentation of the new Code. Previously each principle was defined and given context through a rationale before relevant key outcomes and recommended practice were detailed.
The new code has adopted a different structure:
- Whilst every principle is still defined, readers are given examples of when “you known it’s working”, striking a somewhat more encouraging tone.
- Each principle has now includes a series of behaviours, which are often extended specifically for charities with staff.
- Once the behaviours of a given principle are set out, a list of policy, processes and practice are detailed, again often extended for large charities (though the Code’s definition of ‘large’ is not explicitly included)
- Finally, each principle includes a list of ‘suggested evidence and assurance’.
The ICAEW argues that the increased focus on board-level behaviours in the new Code recognises the challenges presented the financial pressures being felt by many charities and an environment increasingly characterise by polarised opinions.
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MHA’s Not-for-Profit eNews provides regular insights on key developments affecting charities, education providers, and social enterprises. To discuss how these updates may affect your organisation, please contact a member of our Not-for-Profit Audit and Advisory team.
