SORP 2026 Explained: What Small Charities Need to Change

The Charities SORP 2026 is the new Statement of Recommended Practice for charity accounting, replacing SORP 2019. It applies to accounting periods beginning on or after 1 January 2026, and introduces a three-tier framework that calibrates reporting requirements to a charity's size.

For most small charities, the change is less dramatic than the headlines suggest. Tier 1 — charities on accruals accounts with gross income of not more than £500,000 — has the lightest disclosure requirements of the three tiers. There are still changes small charities need to act on. There is also one widely repeated claim about Tier 1 that the SORP text does not support: that impact reporting is now mandatory for everyone.

Here is what Tier 1 actually means in practice.

The three-tier framework

SORP 2026 introduces three reporting tiers. They apply to charities preparing accruals accounts, and within that population the tier is set by gross annual income — SORP para 38 says a charity "must assess their tier each year based on their annual gross income only". Note the scope limit in para 35 first, though: non-company charities with gross income of £250,000 or less that have chosen to prepare receipts and payments accounts sit outside the tiering altogether, and are directed instead to "refer to the regulatory requirements of their jurisdiction(s) for reporting purposes".

Tier	Income	Description
Tier 1	Accruals accounts, gross income not more than £500,000	Simpler requirements designed for small charities
Tier 2	Above £500,000, and not more than £15 million	Standard SORP requirements
Tier 3	Above £15 million	Extra disclosures for the largest charities

The tiers are set out in the SORP itself, published by the Charities SORP Committee. The aim is to reduce the disclosure burden on small charities while applying full IFRS-aligned standards to the largest.

If you prepare accruals accounts and your charity's gross income is not more than £500,000, you fall into Tier 1. SORP para 35 defines the band inclusively — "All charities applying accruals accounts and with a gross income of not more than £500,000" — so a charity at exactly £500,000 is Tier 1, and Tier 2 starts "above the tier 1 threshold". Use our free SORP 2026 Tier Calculator to confirm which tier applies to you.

When does SORP 2026 take effect?

SORP 2026 applies to accounting periods beginning on or after 1 January 2026. The effective date is the start of the accounting period, not the date the accounts are signed off or filed.

A few worked examples:

• Year-end 31 December: First SORP 2026 accounts cover the year ending 31 December 2026.
• Year-end 31 March: First SORP 2026 accounts cover the year ending 31 March 2027 (accounting period started 1 April 2026).
• Year-end 31 August: First SORP 2026 accounts cover the year ending 31 August 2027 (accounting period started 1 September 2026).

Earlier application is permitted, but most small charities will simply apply SORP 2026 from their first accounting period that starts on or after the effective date.

What Tier 1 charities need to do

The lightest reporting tier still requires accruals accounts (assuming your governing document or income level requires accruals — receipts and payments accounts remain an option for non-company charities with gross income of £250,000 or less, or £500,000 or less for financial years ending on or after 30 September 2026 per SI 2026/427 art.3(3) and art.5(6) — and since SORP 2026 first applies to periods starting on or after 1 January 2026, the £500,000 figure is the one that will apply to almost every charity reading this). What changes is the depth of disclosure.

1. Achievements reporting — and where impact reporting actually bites

What Tier 1 must do here is narrower than the headlines suggest. Table 1 in SORP module 1 assigns Tier 1 a single "Achievements and performance" paragraph — 1.27 — and that paragraph says the report "must contain a summary of the main achievements of the charity", then offers two questions that "should be considered by trustees": in what way the charity's work has made a difference to its beneficiaries' circumstances, and whether it has provided wider benefits to society. So the achievements summary is mandatory; weighing those two impact questions is a should.

The full impact duty is para 1.30 — "The report must explain the impact the charity is making and must consider the long-term effect of its activities on individual beneficiaries and on society as a whole" — and it is printed under the heading "Tier 2 – in addition to tier 1 requirements". Para 1.14 requires charities to "comply with all the applicable reporting requirements prefixed with a 'must'", and para 1.13 says Tier 1 charities are "encouraged to include some or all of the additional information required of tier 2 and tier 3 charities". A Tier 1 charity is therefore encouraged, not compelled, to write an impact narrative.

That is a reason to do it well rather than a reason to skip it. You still have to summarise your achievements, you still have to report on public benefit in the trustees' annual report, and an impact narrative is what funders read first. For a small charity it does not need to be a research-heavy section: a few paragraphs with one or two specific examples, ideally with a story illustrating outcomes for beneficiaries, covers the mandatory achievements summary and answers both of the questions para 1.27 puts to trustees.

The shift is from describing outputs ("we ran 12 sessions") to explaining outcomes ("12 sessions reached 84 people, of whom 31 went on to find work within six months"). Specific, evidence-based, beneficiary-focused.

2. Simplified income classification

Tier 1 charities can present income and expenditure by natural classification (donations, grants, trading income, investment income) rather than by activity (charitable activities, fundraising, governance). For small charities that find activity-based reporting awkward — particularly those without separate cost centres for each activity — this is a meaningful simplification.

If you already report by activity and find it works for your trustees and stakeholders, you can keep doing so. The choice is yours.

3. ESG reporting remains optional

For Tier 1 and Tier 2 charities, environmental, social, and governance (ESG) reporting is optional. Only Tier 3 charities (over £15m income) face mandatory ESG disclosures under SORP 2026. If you want to include ESG content voluntarily — for example, to communicate environmental impact to funders — you can.

4. Cash flow statement: usually exempt

Tier 1 charities are generally exempt from preparing a cash flow statement (the rule is that the requirement applies to Tier 3 charities and any charity that does not qualify as a "small entity" under FRS 102). Most charities under £500,000 income qualify as small entities and will not need a cash flow statement.

5. New revenue recognition model

SORP 2026 aligns with FRS 102's five-step revenue recognition model (which is itself aligned with IFRS 15). For most small charities receiving donations, grants, and simple trading income, this rarely changes the timing of recognition in practice. But trustees should check how the charity recognises restricted grants — the new framework asks more pointed questions about when performance obligations are met.

What does NOT change for Tier 1

A few things stay the same:

• Annual return filing with the Charity Commission continues unchanged. See our annual return guide for the prep process.
• Reserves policy disclosure in the trustees' annual report is still required (under CC19). See our charity reserves policy guide.
• Audit thresholds are governed by the Charities Act 2011, not SORP. For financial years ending on or after 30 September 2026 the audit threshold is £1.5 million income (or £500,000 income plus £5 million total assets); for a financial year ending before that date it is still £1 million income (or £250,000 income plus £3.26m total assets). SI 2026/427, in force since 30 September 2026, moved both figures in section 144 at art.3(4) — "£1 million" to "£1.5 million" and "£3.26 million" to "£5 million" — while the £250,000 income leg of the asset test moved to £500,000 via the section 133 accounts threshold at art.3(3). Most Tier 1 charities will remain below the audit threshold and only need an independent examination.

A simple preparation checklist

If your accounting period starts on or after 1 January 2026:

1. Confirm your tier. Income up to £500,000 = Tier 1. Use the SORP 2026 Tier Calculator.
2. Draft your achievements summary, then plan the impact narrative. The summary of main achievements is mandatory for Tier 1 (para 1.27). The fuller outcomes-and-impact narrative is a Tier 2 "must" (para 1.30) that Tier 1 charities are encouraged rather than required to add — but it is the part funders read, so draft a short paragraph for each main charitable activity describing outcomes, not just outputs, and identify one or two specific beneficiary stories you can use in the annual report.
3. Decide your classification approach. Natural (by income type) or activity-based — pick one and apply it consistently.
4. Brief your independent examiner or auditor. Even Tier 1 charities benefit from a short conversation with their examiner about SORP 2026, especially around impact reporting.
5. Update your trustees' annual report template. Add an impact section if you do not already have one. Refresh the reserves policy wording.
6. Review your governance code position. The 2025 Governance Code refresh and SORP 2026 are complementary — both ask trustees to think more clearly about outcomes.

When to get advice

Most small charities can apply Tier 1 SORP 2026 without external advice. Get specific advice from your independent examiner, accountant, or a specialist charity advisor if:

• Your charity has restricted funds with complex performance conditions (the revenue recognition rules may change timing)
• Your charity holds investment property or has a defined benefit pension scheme
• Your charity is close to the £500,000 threshold and the choice between Tier 1 and Tier 2 will affect disclosure significantly
• Your charity has any unusual income streams (social investment, trading subsidiaries, complex grant arrangements)

For a broader view of your compliance obligations, see our charity compliance checklist for 2026.

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This guide applies to charities operating in England and Wales preparing accounts under the Charities SORP. The SORP is set by the Charities SORP Committee and applies in conjunction with FRS 102. This is general guidance based on the published SORP 2026 — verify against your charity's specific circumstances and the full SORP text. Not accounting or legal advice.

Sources

• The Charities SORP — official SORP Committee site
• Charity reserves: building resilience (CC19) — GOV.UK
• Charity reporting and accounting: the essentials (CC15d) — GOV.UK