Shift to more proportionate accounting regime for UK charities
Source: gov.uk (2025-10-31)

New Charities Statement of Recommended Practice: Accounting and Reporting by Charities (‘the SORP’) makes charities’ financial reporting more proportionate.

In finalising the new accounting framework, the charity regulators across England and Wales, Scotland and Northern Ireland (who together make up the SORP-making body) have balanced a desire for simplicity and clarity for charities with the importance of transparency for donors and interested third parties.

This is reflected in a refreshed approach to Trustees’ Annual Reports to include a wider range of achievements and risks, alongside the introduction of three new tiers that require the most detail and transparency from the UK’s largest charities. Unless required by Financial Reporting Standard 102 (FRS 102), only charities with incomes of more than £15 million will be required to produce a detailed statement of cashflows, reducing the burden on charities with an income between £500,000 and £15 milllion.

Key changes confirmed in the SORP update, which will take effect for accounting periods starting on or after 1 January 2026, include:

New requirements for how charities should report on certain types of income and lease arrangements. The SORP now includes charity sector specific examples to assist charities in applying new requirements introduced by the Financial Reporting Council’s update to Financial Reporting Standard 102.

Three new tiers that set out expectations for increased transparency for the largest charities:
- Tier 1 – for charities with income up to £500,000
- Tier 2 – for charities with income between £500,000 - £15 million
- Tier 3 – for charities with income above £15 million
Refreshed Trustees Annual Report requirements, with further guidance added on how to report financial reserves and plans about the future. Areas of particular public and donor interest – including impact reporting, environmental, social and governance issues – now have dedicated sections, with associated guidance on reporting.

Updates to how charities should account for social investments, making it simpler for charities to report on such holdings and aligning the definition of social investments in SORP with the definition in the Charities Act 2011.

Easier to understand requirements for reporting provisions and contingencies.

Regulators will work with sector bodies and professional advisory bodies to support the shift to the new framework during the coming months.

Consultation and deliberation on the new SORP has been extensive, including a three-month consultation taking place earlier in 2025 attracting 150 responses from charities, professionals and independent bodies.

The consultation showed wide support for the move to a three-tier reporting framework, though views varied on the most appropriate threshold levels. Reflecting this, and other considerations including that – for England and Wales – the Department for Culture, Media and Sport (DCMS) has announced a package of changes to the accounting thresholds set in legislation, the SORP-making body has opted to confirm the tiers proposed in its consultation for the time being. The SORP-making body is committed to considering the tiers through further work during 2026-27.

Charity Commission for England and Wales Chief Executive, David Holdsworth, said:

Clear and transparent reporting is essential to maintaining public trust in charities. People want reassurance that their donations are being used effectively to support good causes. We hope the updated SORP helps charities achieve this by enabling them to communicate both their financial position and the impact of their work more effectively.

We welcome the changes introduced by DCMS to ease administrative burdens for charities in England and Wales. We’re also beginning work with them to explore further opportunities to simplify the regulatory landscape.

As we move forward, we look forward to continuing conversations with charities across England and Wales, and we’re grateful to everyone who contributed to the consultation on the updated SORP.

The Charity SORP 2026 can be viewed on the SORP microsite (http://www.charitysorp.org/).

In related changes announced by DCMS for England and Wales, the threshold for some charities to produce accounts reflecting the SORP is to be doubled from £250,000 to £500,000. More than 5,130 non-company charities in England and Wales now could opt to produce receipts and payments accounts instead.

This is part of a package of changes introduced by DCMS following a consultation (https://www.gov.uk/government/consultations/consultation-on-financial-thresholds-in-charity-law/consultation-on-financial-thresholds-in-charity-law#reporting-and-accounting-thresholds), including changes to the thresholds for audit and independent examination, which will further reduce administrative burdens on charities in England and Wales.

The Charity Commission for England and Wales will commence work with DCMS to explore further ways the regulatory landscape can be simplified. This work will include exploration of the development of a standard form and content for receipts and payments accounts and the digitisation of charity accounts filing.

ENDS

Notes to editors

Charity law across the UK requires all charities to prepare accounts.

All charities that prepare their accounts on a ‘true and fair’ basis (also known as accruals accounts) must follow the Charities Statement of Recommended Practice: Accounting and Reporting by Charities (SORP).

Adoption of the SORP is mandatory in the charity law jurisdictions in the UK but is voluntary in the Republic of Ireland.

Charity law currently requires charities in England and Wales with a gross income of more than £250,000 to prepare accruals accounts under the SORP framework (different accounting rules may apply to exempt charities). This threshold will change to £500,000 after the government’s public consultation (https://www.gov.uk/government/consultations/consultation-on-financial-thresholds-in-charity-law/consultation-on-financial-thresholds-in-charity-law). In Scotland and Northern Ireland, accruals accounts are required where the gross income is £250,000 or more. Company law requires all companies, including charitable companies, to prepare accruals accounts.

The aims of the Joint SORP-Making Body in updating the SORP were – encouraging accuracy and consistency; serving the needs of donors and the public; simplicity; and proportionality.

The SORP making body consists of:
- Charity Commission for England and Wales (https://www.gov.uk/government/organisations/charity-commission)
- Office of the Scottish Charity Regulator (https://www.oscr.org.uk/)
- The Charity Commission for Northern Ireland (https://www.charitycommissionni.org.uk/)
- Charities Regulator for Ireland (https://www.charitiesregulator.ie/) is an observer
Financial Reporting Standard 102 is applicable in the UK and Republic of Ireland.

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