Get Ready for 2026… Charity finance
As part of our December “Get Ready for 2026” Programme, our first focus area is charity finance.
The Charities SORP (Statement of Recommended Practice) has recently been updated, and SORP 2026 will apply to reporting periods starting on or after 1 January 2026. Changes have been made to lessen the reporting burden on smaller charities, and to better align with FRS102.
You can view a summary of the key changes here: Summary of Changes SORP 2026
You can view the Charities SORP 2026 here: SORP 2026 and FRS102 here: FRS 102
Significant changes
-
To reflect changes to FRS 102, guidance is included on exchange transactions, in particular, the 5-step model for income recognition. In response to stakeholder feedback, the module also provides guidance on when grant income is income from an exchange transaction or when it is income from a non-exchange transaction. Other changes to the module are to improve clarity of reporting.
-
In response to stakeholder feedback, this module in the previous SORP has now been split with new module 10A now covering provisions, contingent liabilities and contingent assets. Some limited changes have been made to ensure consistency with FRS 102.
-
Three new tiers have been inroduced to ensure reporting is more proportionate to the 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
-
This module includes new and enhanced disclosure requirements plus changes to the structure of the module. The new requirements include:
• reporting on how a charity is responding to and managing environmental, governance and social matters;
• impact reporting is now a ‘must’ for all charities; and
• tier 2 and tier 3 charities should provide more narrative on how legacies are recognised in the accounts.
-
To help smaller charities, the requirement in the previous SORP for charities with income over £500,000 to produce a cash flow statement has been changed. The SORP increases the income threshold to £15 million (tier 3). This means that only charities in tier 3 are required by SORP to produce a statement of cashflows. However, charities in tiers 1 and 2 are required by FRS 102 to prepare a statement of cash flows where they do not meet the definition of a small entity under FRS 102. Other changes in the module are made to be consistent with FRS 102.
-
Changes made to be consistent with FRS 102, to include additional information to reflect the new lease accounting requirements and to assist users understanding/usability
-
The main change to this module relates to providing clarity on the measurement of heritage assets that have been donated.
A heritage asset is a tangible or intangible asset with historical, artistic, scientific, technological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture.
-
Guidance in this module is updated to be consistent with FRS 102, to reflect current legal requirements, to provide more clarity for users and more consistency in reporting. In particular, the terms ‘Mixed Motive Investments’ and ‘Programme Related Investments have been retired to align with the Charities Act 2011.
Changes to examination requirements (30 September 2026)
Additionally, changes to examination requirements are expected to come into effect on 30 September 2026, and apply to accounting years that end on or after 30 September 2026.
| Requirement | Current threshold | New threshold (from 30 September 2026) |
|---|---|---|
| Accounts must be independently examined | Income over £25,000 | Income over £40,000 |
| Examination must be by a professionally qualified Independent Examiner | Income over £250,000 | Income over £500,000 |
| Non-company charities can choose to produce receipts and payments accounts | Income below £250,000 | Income below £500,000 |
| Accounts must be audited | Income over £1,000,000 or Assets over £3,260,000 | Income over £1,500,000 or Assets over £5,000,000 |
| Group accounts must be prepared and audited | Aggregate income of group £1,000,000 | Aggregate income of group £1,500,000 |
What should I do now?
Consider which tier your organisation is going to land in for your next financial year and make sure that your policies and procedures are updated to match the new regulations.
Speak to your accountant, auditor or independent examiner if you have any concerns about what these changes mean for your organisation.
Make sure that your trustees are aware of these changes. We have a webinar for Treasurers taking place on 10th February 2025, so make sure you’ve booked your place Charity Treasurer Training — Gloucestershire VCSE Alliance
Further information and training
We highly recommend becoming a member of the ICAEW Charity Community. It’s free, and gives you access to lots of materials which are useful for both finance professionals and more generalist charity staff. You can sign up here: Join the Charity Community | ICAEW
As part of the above, the ICAEW has a 3.5 hour on-demand session on these changes for small charities Small charities: preparing for change
You can view an information sheet on changes to Income Recognition here: Income Recognition Charities SORP 2026
Our next instalment will look at changes to employment law taking place in 2026.