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The Charities SORP sets out how charities prepare accruals accounts. A new version, SORP 2026, applies to reporting periods starting on or after 1 January 2026. It splits charities into three tiers by income, changes how some income and leases are accounted for, and updates what goes into the trustees' annual report.
This guide explains what the SORP is, who has to follow it, and what has changed.
This article covers charities registered with the Charity Commission for England and Wales. Thresholds and rules change from time to time, so check the latest guidance on GOV.UK and the Charities SORP website.
What is the Charities SORP?
SORP stands for Statement of Recommended Practice. The Charities SORP explains how charities apply the UK accounting standard, FRS 102, to their own circumstances: funds, grants, legacies, volunteers and the trustees' annual report.
Accruals accounts must give a true and fair view. Following the SORP is how a charity does that.
Who has to follow it?
Charities that prepare accruals accounts. That includes:
every charitable company, whatever its size
unincorporated charities and CIOs with gross income over £500,000 (financial years ending on or after 30 September 2026; £250,000 for earlier years)
smaller charities that choose accruals accounts, or whose governing document or funder requires them.
Charities preparing receipts and payments accounts do not follow the SORP. Some sectors have their own SORP instead. Registered providers of social housing, for example, follow the Housing SORP.
When does SORP 2026 apply?
SORP 2026 applies to accounting years starting on or after 1 January 2026. A charity with a 31 March year end first uses it for the year starting 1 April 2026, ending 31 March 2027. A charity with a 31 December year end first uses it for the year ending 31 December 2026. Earlier years follow the previous Charities SORP (FRS 102), second edition 2019.
The three tiers
SORP 2026 makes reporting more proportionate by splitting charities into three tiers based on income:
| Tier | Income |
|---|---|
| Tier 1 | £500,000 or less |
| Tier 2 | Over £500,000, up to and including £15 million |
| Tier 3 | Over £15 million |
Your tier affects how much detail you report under the SORP. The SORP also explains how its tiers interact with the Companies Act size thresholds, which matters for charitable companies.
Statement of cash flows. Under the previous SORP, charities with income over £500,000 had to prepare one. SORP 2026 raises that to tier 3 only. Charities in tiers 1 and 2 still need one under FRS 102 if they do not qualify as a small entity.
The main changes
Income recognition
FRS 102 has introduced a five-step model for recognising income from exchange transactions, where a charity provides goods or services in return for payment. SORP 2026 includes guidance on applying it. It also gives guidance on when a grant counts as an exchange transaction and when it is a non-exchange transaction, such as a donation. Charities with contract income, or grants that require specific goods or services in return, should review how these are treated.
Lease accounting
There is a new SORP module on leases, reflecting changes to FRS 102. Most leases a charity rents will now go on the balance sheet, except short-term (under 12 months) and low-value leases. The module includes a flowchart and examples. The SORP-making body has also published a lease accounting helpsheet in three parts: working out whether a lease exists and which exemptions apply, accounting for general leases, and accounting for peppercorn and social donation leases. If your charity rents premises, vehicles or equipment, review those agreements early.
Trustees' annual report
The trustees' annual report module has been restructured, with new and enhanced disclosures:
Impact reporting is now a "must" for all charities.
Reporting on how the charity responds to and manages environmental, social and governance matters.
Additional guidance on reporting reserves and plans for the future.
Tier 2 and tier 3 charities should give more narrative on how legacies are recognised in the accounts.
Other changes
Provisions and contingencies now have their own module, with clearer requirements.
Social investments have simplified accounting and reporting requirements.
Fund accounting has been updated for changes in legislation.
Going concern has more guidance.
Reserves now have a definition within the SORP.
Common questions
We prepare receipts and payments accounts. Does SORP 2026 affect us? No. The SORP applies to accruals accounts. The trustees' annual report is still required, but receipts and payments charities provide less information in it.
We are a small charitable company. Which tier are we? Tiers are based on income. A charitable company with income of £500,000 or less is in tier 1. It still prepares accruals accounts under the SORP.
Do we need to restate last year's figures? For leases, comparatives are not restated. Instead, the cumulative effect is adjusted in opening reserves at the start of your first SORP 2026 year. For income from contracts, you can either restate comparatives or use the same modified approach. Check which suits your charity before your first SORP 2026 year end.
Where can we read the SORP itself? The full SORP 2026 and a summary of changes are on the Charities SORP website, charitysorp.org.
How Codec Accounting can help
We cover all areas of accounting, but we have deeper skills and experience with charities. We work with charities across Ealing, West London and London, as well as remotely across the UK. We can:
Confirm your tier and what it means for your reporting.
Review your grants, contracts and leases against the new income and lease rules.
Prepare SORP 2026 accruals accounts, ready for your trustees and your independent examiner or auditor.
Help your trustees draft the impact and reserves sections of the annual report.
The first SORP 2026 year end is where the work lands. Charities that review their leases and income now will spend less fixing figures later.
Book a meeting, call 0203 143 2772 or contact us to talk it through.
This article is general guidance, not advice for your specific situation. Requirements change, so check current guidance on GOV.UK.