The new Charities SORP is coming: Everything you need to know

The new Charities Statement of Recommended Practice (Charities SORP) is due to be published later this year, effective for financial periods starting on or after 1 January 2026. While this may feel a while off, now is the time to assess the impact and prepare for a smooth transition.

Below, we set out the key changes and the actions charities can take now. It’s also worth noting that some of these updates may affect reported income and assets, which could in turn impact size classification and UK audit requirements.

Changes to disclosures – know your tier

For a SORP that promised to “Think small first”, there is a tiered approach to reporting; however, it should be noted that the Tiers and audit thresholds (England & Scotland) do not match, so you need to be careful with the required disclosures.

• Tier 1 – income under £500,000
• Tier 2 – income more than £500,000 and less than £15 million
• Tier 3 – income over £15 million

Each module sets out requirements by tier. Your first step is to confirm which tier the charity will fall into. Be cautious, as changes such as new lease accounting could increase reported income and move the charity into a higher tier.

Only Tier 3 charities need to include cash flow statements under the new SORP, although charities set up as companies should check whether Company Law requires one. This simplifies reporting compared to the current rules, where income over £500,000 triggered a cash flow statement.

Sustainability and impact – Plan time for your trustees’ report

The trustees’ report will reflect the tiering, with disclosure requirements increasing as the charity moves up.

A new sustainability section applies to Tier 3 charities, with disclosures encouraged for Tiers 1 and 2. Examples include climate risk KPIs, social responsibility, board diversity and governance.

Future plans must be included in each trustee’s report. Tier 1 requires only a summary, while Tiers 2 and 3 need more detail on objectives, planned activities, and future direction. All tiers must explain how their activities benefit society and the impact achieved; again, the required disclosure increases with the Tiers.

Some charities already report this, but for those that don’t, it’s wise to gather information now and identify who in your organisation can contribute. This will often be teams outside of the finance department.

For charities such as grant-making bodies, this may require more effort than before. Done well, a trustees’ report is not only a compliance exercise but a valuable tool for funders.

Leases – Gather information

Currently, operating leases are treated as expenses, while finance leases appear on the balance sheet. Under the new Charity SORP, most operating leases will move onto the balance sheet as a right-of-use asset with a matching liability.

This could push some charities over asset or income thresholds, impacting UK audit requirements.

Charities should gather lease data now – including terms, end-of-lease provisions, rental charges, and implicit interest/discount rates. You won’t need to restate comparatives, but good records will be essential for incorporating the new assets and liabilities from 1 January 2026 .

If the charity benefits from rent discounts, these may need to be recognised as donations in kind. This could increase reported income and impact the tier classification.

Revenue recognition – Consider the impact

The new SORP introduces a five-step approach to revenue recognition for exchange transactions (e.g. membership fees, service contracts). The expected impact is limited, but you should map out your income streams now and apply the model where relevant. Judgements in respect of multi-year membership arrangements may need to be revisited.

For non-exchange transactions such as donations, legacies, and gifts, there is unlikely to be a change.

Provisions, contingent liabilities, contingent assets and funding commitments

A new module in the SORP covers provisions, contingent liabilities and contingent assets. This includes dilapidation provisions that may arise under the new lease rules.

For grant-making charities, this section offers clarity on how to treat multi-year grants and funding commitments. It sets out when commitments should be recognised as liabilities, and when they should not. Examples in the new SORP will be especially useful here.

Preparing for change

The changes won’t affect all charities equally. For some, the new accounting for charities rules will mean more work, especially in the trustees’ report and lease accounting. For others, the impact will be minimal.

What’s clear is that preparation will make the transition easier. Start by:

• Confirming your reporting tier.
• Reviewing your leases.
• Mapping income streams against the new revenue recognition rules.
• Planning updates to your trustees’ report.

How AAB can help

In this article we’ve covered just some of the key changes coming to the Charities SORP 2026. It’s important to prepare easily so the changes don’t feel stressful. At AAB our Not For Profit team have been supporting clients to prepare effectively as they transition.

If you have any questions about the changes or need support please do not hesitate to get in contact with Lucy Jenkins, Andy Shaw or a member of our Not For Profit team.