If your charity uses restricted funds, relies on grants, or even just wants to keep things tidy for your trustees, then the new SORP 2026, published in October 2025, will affect you.
Before you sigh or tense up at the thought of “another set of changes”, here’s a bit of reassurance; this is not a scary update!
In fact, if you take a calm, practical approach now, SORP 2026 could be the thing that finally helps your charity tell a clearer financial story to your board, your funders, and even to your community.
Why SORP 2026 matters (and why this version feels different)
Every version of SORP aims to improve transparency and make charity accounts more understandable. But if I’m honest, many small charities just try to survive the accounting year-end — they don’t think about SORP until they absolutely must.
SORP 2026 changes that dynamic a little, because:
- the rules around explaining restricted funds are much clearer
- the expectations around income recognition are stronger
- trustees’ annual reports need to be more honest and more informative
- and the updates tie directly into recent changes in UK GAAP (FRS 102)
My view is that this version of SORP feels like a nudge: a reminder that your accounts are not just numbers. They’re a story. And SORP 2026 is asking that story to be clearer, kinder, and more structured.
Where Does Your Charity Sit? Understanding the Reporting Tiers
Before diving into the specific changes, it’s important to know which reporting tier your charity falls into. This determines the type of accounts you prepare and how SORP 2026 applies to you.
Here’s the simple breakdown:
Tier 1: Receipts & Payments Accounts
You’re Tier 1 if your charity:
- has income under £250,000, and
- is allowed (by your governing document or funders) to prepare Receipts & Payments
This tier has the simplest requirements, but SORP 2026 still affects your narrative reporting, fund explanations, and trustee responsibilities.
Tier 2: Accrual Accounts under SORP
You’re Tier 2 if your charity:
- prepares accrual accounts, and
- must follow the full SORP requirements, including the Statement of Financial Activities (SOFA), notes, and disclosures.
Many charities, even small ones, fall into this tier simply because their constitution, funders, or legal structure require them to use accruals. If your governing document or funders do not require accruals, then you move into Tier 2 based on income: currently over £250,000, increasing to £500,000 for financial years starting on or after 1 October. Below this threshold, charities can normally choose to stay on Receipts & Payments unless another requirement applies.
Tier 3: Larger or More Complex Charities
This includes charities that:
- exceed the audit threshold, or
- have more complex financial structures.
These charities already follow the full SORP and will need to make sure templates, disclosures, and accounting judgements reflect the 2026 updates.
Why knowing your tier matters now
SORP 2026 affects each tier differently.
👉🏾 Tier 1 charities need clearer documentation and simpler explanations.
👉🏾 Tier 2 charities need stronger disclosures, especially around restricted funds and income.
👉🏾 Tier 3 charities will have more detailed technical updates to absorb.
Once you know your tier, the rest of this blog will make a lot more sense.
The Key SORP 2026 Changes: in real, simple language
Here’s what you actually need to know.
- Restricted funds need clearer explanations
SORP 2026 asks for more transparency in telling funders, trustees, and the public:
- what each fund is for
- how you’ve used it
- what hasn’t been spent yet
- and why
No more vague “balance carried forward”.
Think of it this way: if someone gave you money for a specific purpose, they should be able to understand; without stress, how you managed it.
- Income recognition rules are tightening
This affects:
- multi-year grants
- contracts
- performance-related grants
- anything with conditions or clawback clauses
In practical terms:
👉🏾 You must recognise income at the right time, not when it’s convenient.
👉🏾 And your audit trail needs to show why you made that decision.
If your charity has ever struggled with “When do we recognise this?” – SORP 2026 guides you more clearly.
- Trustees’ Annual Reports need more clarity
Start thinking now about how your board describes:
- reserves (how calculated, why that level, what’s the risk?)
- risk management
- the public benefit
- governance and decision-making
Trustees don’t need jargon; they need confidence. And that comes from clarity.
- Alignment with FRS 102 changes
SORP 2026 reflects recent changes to accounting standards, especially around:
- leases
- revenue recognition
- assets and liabilities
Even if your charity doesn’t have big assets or leases, the knock-on effects impact templates, wording, and how you present your financial story.
So what should your charity actually do now?
Here are the steps that will genuinely make a difference — and they don’t require any panic.
- Review and tidy your restricted funds
Ask yourself:
- Do we have clear, simple notes on every fund?
- Do trustees understand what each fund can and can’t be used for?
- Are reports to funders consistent with internal reports?
- Do we track fund movements clearly?
If the answer to any of these is “not really”, now is the moment to fix it.
- Refresh your reserves policy
SORP 2026 expects better storytelling around reserves; not bigger reserves, but clearer ones.
You should be able to say:
- how you calculated reserves
- why they’re at the level they are
- how trustees use reserves to manage risk
This is an area where many small charities unintentionally undersell themselves.
- Strengthen your audit trail
This is the simplest thing to fix (I think); and the most powerful.
Start with:
- grant agreements
- bank reconciliations
- payroll evidence
- spend approvals
- restricted fund allocations
- notes explaining income decisions
You don’t need a fancy system. Even a clean folder structure makes a difference.
- Prepare your trustees
This doesn’t need to be a training course.
A calm, 30-minute walkthrough can help your board:
- reduce SORP-related anxiety
- understand restricted funds better
- feel prepared for the year-end
- and know what their responsibilities truly are
Boards that understand SORP perform better; and ask better questions.
- Update your accounting software and templates
Whether your charity uses QuickBooks, Xero, Sage, or other software (or even spreadsheets):
- check your fund codes
- check your income categories
- review your year-end reporting templates
- make sure restricted funds are being tracked separately
Small updates now → big time saved later.
How BAnC Services can support you
I help small and mid-sized charities:
- understand and prepare for SORP 2026
- clean up restricted funds
- set up fund registers and tracking
- strengthen documentation
- support trustees
- simplify year-end
If your charity wants a SORP readiness review or trustee briefing, feel free to reach out.
If you’d like to explore the technical detail in full, you can read the complete SORP 2026 guidance on the official Charity SORP website.
Final Thought
My view is that SORP 2026 is not about making your life harder. It’s about helping your charity tell a clearer story; one that reflects your work, your impact, and your responsibility to the people who trust you.
If you approach it step by step, you’ll not only be compliant…
You’ll feel more in control of your organisation’s finances.
And that confidence is worth every bit of preparation.
________________________________________
About Me
Hi, I’m Aishat — founder of BAnC Services, where we help small charities and social enterprises make sense of their numbers, build stronger finance systems, and plan for sustainability (not just survival).
If you need support with budgeting, funding applications, or reviewing your costs — we’re here for that.
👉🏾 Find out more about working with us
📩 Or Get in touch to see how we can support your team.
Want more tips on charity finance and running a financially confident organisation?
📩 Subscribe to the newsletter for business and financial management updates
🎧 Listen to the podcast – The Nonprofit Bookkeeper is available wherever you tune in
📘 And if you’re looking for a jargon-free guide to the finance terms that matter –
grab your copy of Charity Finance from A to Z.