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 — which covers charities with gross income up to £500,000 — has the lightest disclosure requirements of the three tiers. But there are some changes that small charities still need to act on, including new requirements around impact reporting.

Here is what Tier 1 actually means in practice.

The three-tier framework

SORP 2026 introduces three reporting tiers based on gross annual income:

Tier	Income	Description
Tier 1	Up to £500,000	Simpler requirements designed for small charities
Tier 2	£500,000 to £15 million	Standard SORP requirements
Tier 3	Over £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 your charity's gross income is under £500,000, you fall into Tier 1. 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 under £250,000 income). What changes is the depth of disclosure.

1. Mandatory impact reporting

Impact reporting is no longer optional. SORP 2026 requires all charities — including Tier 1 — to report on the difference their work makes, not just what they did. For small charities, this 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, will meet the requirement.

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. The current audit threshold is £1 million income (or £500,000 income plus £3.26m total assets); it rises to £1.5 million income from 1 October 2026. 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. Plan your impact reporting. Draft a short paragraph for each main charitable activity describing outcomes (not just outputs). 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