The new Charity SORP was released on 31 October 2025. This will apply for financial periods beginning on or after 1 January 2026. The SORP introduces a number of changes aimed at improving transparency, proportionality and relevance in charity financial reporting. When drafting the new SORP, the SORP Committee also sought to think small first. They have taken into consideration the additional burden some reporting requirements can bring for smaller charities.
This thinking is visible in the new three tier structure for reporting, which looks to ensure that reporting requirements are proportionate to a charity’s size.
• Tier 1: Income up to £500,000
• Tier 2: Income between £500,000 and £15 million
• Tier 3: Income over £15 million
Charities must comply with the requirements of their own tier and all tiers below. Each SORP module clearly states which tiers it applies to. Combined with the modular layout, this should make the SORP easier for users to navigate. The tiered approach will also help ensure smaller charities are not overburdened while larger organisations provide the level of transparency stakeholders expect.
In other changes, the trustees’ annual report has been refreshed to place greater emphasis on:
• Impact reporting (within the ‘Achievements and Performance’ section)
• Sustainability (a new section required for Tier 3 charities; encouraged for others)
• Future plans, now required for all tiers
Within the Trustees’ Report, the SORP also encourages charities to explain the long-term effect of their work on beneficiaries and society.
Additional guidance is provided on reporting reserves. Where a charity is not holding reserves or has a negative net assets on its balance sheet, it must explain why it is still operating as a going concern. Charities must also explain further details of the role of volunteers within the organisation.
The changes introduced by FRS102 are also reflected in the new SORP with the modules on revenue and lease accounting. For income, there is a distinction between exchange transactions were there is an exchange of good and services (contract income) and non-exchange income (voluntary income). Exchange transactions being subject in line with FRS102 to the new 5 step revenue model for recognising income. Recognition of voluntary income is also modified, with charities needing to assess the conditions attached to determine the correct recognition basis. Income will be recognised either on receipt or when it is receivable. unless there are future performance-related conditions, in which case the income is recognised once these performance related conditions have been met. The module also clarifies treatment for subscriptions, dividends, and legacy income.
For lease accounting, there is a new module which introduces right-of-use asset accounting for operating leases. This means most leases will now appear on the balance sheet, increasing both assets and liabilities, with exemptions applying for low-value or short term leases. The SORP also provides guidance on peppercorn rents, which do not meet the definition of a lease under FRS102.
In other changes, the requirement to produce a cashflow statement will now only apply to Tier 3 charities. Those charities that do not qualify as small under FRS102, exempting the majority of charities with income below £15m from needing to produce a cashflow statement.
There is also a new module covering provisions, contingent liabilities and assets. This includes
accounting for funding commitments, clarified guidance on measuring the value of donated heritage assets and the simplification of social investments into one new category where previously such investments were split between programme related investments and mixed motive investments.
It is important that all charities review the new SORP requirements to understand how the changes will impact their organisations, Particularly the changes to accounting for income and leases, to determine any action they need to take now, including consulting with their accountant/auditor. Similarly, the changes to the Trustees Report provide an opportunity to refresh how the information is presented, what message you want to convey with the narrative reporting, and thinking about the impact of your work and how this can be best reflected in your report. This will likely require additional time to plan and collate the required information.
Further information – Home – SORP