Charities SORP 2026: Trustee Annual Report compliance

With the Charities SORP 2026 finally upon us, organisations across the country are still getting to grips with what the changes mean in practice. For many, the same questions keep coming up; what’s changed? How does it affect us? And what can we do to stay compliant? 

To help answer these questions, our Non-Profit Team had the pleasure of welcoming clients to our Glasgow office for a session explaining the new rules, specifically the trustee annual report requirements. We shared expert insights to help organisations better understand the changes. 

If you couldn’t join our charity audit professionals – don’t worry. This blog highlights some of the key reporting changes you need to know for the Trustees’ Annual Report.  

READ MORE: 5 Charity SORP changes for Irish non-profits 

Trustees Annual Report – what has changed in the Charities SORP 2026?

Widely reported upon in the months leading up to the introduction of the Charities SORP 2026, the new reporting requirements have been split between the three distinct tiers – each coming with their own thresholds and requirements.  

• Tier 1 – Charities applying accruals accounting and with gross income under £500,000 

• Tier 2 – Charities with gross income more than £500,000 but less than £15 million 

• Tier 3 – Charities with gross income over £15 million

Watch out: For those in Tier 3, the rules of Tier 1 and Tier 2 also apply. Gross income definitions also differ within different UK jurisdictions. The Charities SORP 2026 continues to apply ‘must’, ‘should’ and ‘may’ instructions for requirements. ‘Must’ requirements demand full compliance – any departure from a ‘must’ is non-adherence to the SORP. 

Here are the key reporting changes your charity needs to know:  

Objectives & Activities 

Tier 1 – New to tier 1, charities must include an explanation of the scale and nature of activities undertaken by different volunteer roles and their input.  

New to tier 1, charities should explain activities by linking to the financial section of the accounts, which sets out how funds are spent on key activities. This ensures that users of the accounts gain a greater understanding of the detail in the financial statements. 

Tier 2 and 3 – Specific questions are now asked of trustees where they must explain how short-term goals feed into their longer-term objectives. 

Achievements & Performance 

Tier 1 – Specific questions are now asked of trustees where they must summarise the achievements of the charity. 

Tier 2 – New to reporting requirements, trustees must now explain the long-term impact the charity is making from its activities on beneficiaries and to society as a whole. The SORP notes that the use of beneficiary or society-wide impact stories may be of value in communicating meaning.  

Tier 3 – Now in tier 3 only, charities must report on performance of material fundraising activities and the effect of expenditure. 

Finance Review 

Tier 1 – New to tier 1, the policy for holding reserves must be consistent with the financial section of the financial statements. If the policy is not consistent, there must be a reconciliation and explanation.  

New to tier 1, your charity must now:  

• Highlight its financial position. Your charity must compare actual reserves to policy and explain any differences.  

• Set out material designations, the timing of spend on designations, and, if no reserves are held, explain why it is a going concern. 

Tier 2 – New reporting requirement – charities must highlight principal sources of income and how they are spent in line with charity objectives. 

Another new reporting requirement – charities should include the impact of material legacy income that has not been received at the year end. 

Tier 3 – Only tier 3 charities are required to set out factors that may impact their future position. 

IMPORTANT CHANGE LINKED TO FINANCIAL REVIEW: 

The SORP 2026 has provided a clear definition of reserves. 

‘Reserves’ describe the part of a charity’s income funds that are freely available to spend on the charity’s purpose.   

Helpfully, the SORP 2026 provides guidance on how to calculate reserves, considering funds that may not be readily available to spend e.g. fixed asset funds, designated funds etc. 

We are provided with further areas to consider in calculating reserves. 

A change that provides clarity and greater understanding of the financial position of a charity.  

Plans for Future Period

Tier 1 – New to tier 1, charities must provide a summary of plans – considering reserve and going concern policy.  

Sustainability

Tier 1 & 2 – New reporting requirements – charities may disclose how the charity is responding to ESG matters. 

Tier 3 – New reporting requirements – charities must summarise how the charity is responding to ESG issues. 

Although the tier structure operates within the new Charities SORP 2026, it is strongly recommended that, where a ‘must’, ‘should’ or ‘may’ applies and even if in a higher tier, that charities include the requirement in their trustees’ annual report.  

Preparing for your Trustees’ Annual Report 

Preparation is key. Familiarising yourself with the new rules and making the required changes when compiling your Trustees’ Annual Report is the best way to stay compliant

To prepare, you should: 

• Read the Trustees’ Annual Report SORP module. 

• Prepare a structure for the new TAR. 

• Consider who can help prepare different parts of your TAR. 

• Prepare the TAR throughout the year – rather than at the year end. 

• Focus on key areas like impact and outcome of objectives, impact and mitigation of major risks, aligning of narratives with financials, and the assessment of your reserves policy. 

• Get help from your accountant or auditor. 

To summarise, the key changes for the Trustees Annual Report 

Area	SORP 2019	SORP 2026
Legacies	Mainly accounting	More narrative insights
Structure	Small vs large	3-tier framework
Impact reporting	Encouraged	Mandatory
ESG	Not addressed	New requirement
Narrative	Descriptive	Outcome + forward-looking
Reserves	Basic	Detailed, justified, linked to risk
Volunteers	Limited	Expanded disclosures
Overall approach	Compliance-led	Transparency & accountability-led

How AAB can help 

The Charities SORP 2026 brings significant changes – and we’ve only scratched the surface. If you’re unsure what the new requirements mean for your charity or how to stay compliant, we’re here to help. Get in contact with Natalie Boyle or a member of our Not For Profit team.