Charity SORP 2026: a practical checklist before your next year-end

# Charity SORP 2026: a practical checklist before your next year-end

If your charity prepares accruals accounts, SORP 2026 is coming whether you feel ready or not. It applies to accounting periods beginning on or after 1 January 2026. For many charities, that means the first set of “new SORP” accounts will be for the year ending 31 December 2026, but the decisions you make this year will shape those figures.

This guide is written for busy trustees and finance leads. It skips the textbook and focuses on what changes, why it matters, and what to do next.

What SORP 2026 actually is

The Charities Statement of Recommended Practice (SORP) tells charities how to apply UK accounting rules (FRS 102) in a way that makes sense for non-profits. SORP 2026 replaces the previous version and reflects updates to those underlying rules.

Two points of confusion crop up immediately:

1. SORP 2026 is not the same as the new audit thresholds. SORP changes how you prepare and present accruals accounts. Separate changes to independent examination and audit income/asset thresholds are expected to apply for years ending on or after 30 September 2026.
2. Receipts and payments accounts sit outside SORP. Non-company charities below the receipts-and-payments threshold may still prepare simpler cash accounts. That threshold is due to rise (to £500,000), but always check the date your year-end falls under.

If you prepare accruals accounts, keep reading.

The big idea: three reporting tiers

SORP 2026 groups charities into three tiers based primarily on income. The exact boundaries matter for disclosure and narrative reporting, so confirm your tier early, do not wait until the auditor or independent examiner asks.

In plain terms:

• Smaller charities get a lighter reporting burden.
• Mid-sized charities need clearer activity-based reporting and stronger narrative.
• Larger charities face the fullest set of disclosures, including more demanding trustees’ report content.

Your tier can change from year to year. Build a simple annual check into your year-end timetable: What was our gross income? Which tier does that put us in? What extra disclosures does that trigger?

Five changes that will affect most charities

1. Income recognition gets more precise

Expect tighter thinking about when income is recognised, especially where you have contracts, performance conditions, or multi-year funding.

Practical question for your next finance meeting:

For each major income stream, can we explain, in one paragraph, when we recognise it, and what evidence supports that judgement?

Grants, contracts for services, and legacies often need different treatment. If your notes currently say little more than “income is recognised when receivable,” plan to strengthen that wording.

2. Leases move onto the balance sheet

Under the updated FRS 102 approach reflected in SORP 2026, many leases that used to sit quietly in the notes will appear as a right-of-use asset and a matching liability.

That can:

• increase reported assets and liabilities
• change the profile of expenses over time
• affect loan covenants, funder ratios, or internal “free reserves” conversations

Action: list every lease and hire agreement now, property, equipment, vehicles, photocopiers. Note start date, end date, payments, break clauses, and whether VAT is included.

3. The trustees’ annual report carries more weight

Narrative reporting is no longer a polite add-on. SORP 2026 pushes for a clearer link between the story in the trustees’ report and the numbers in the accounts.

Expect stronger expectations around:

• impact (what difference did you make?)
• reserves (what do you hold, and why?)
• risks and going concern
• plans for the future

If last year’s report was largely copied forward, this is the year to rewrite the financial review section properly.

4. Reserves need a real explanation

“We aim to hold three to six months’ expenditure” is no longer enough on its own. Readers, including the Charity Commission, funders, and your own board, should be able to see:

• how free reserves are calculated
• how that figure reconciles to the accounts
• whether you are above or below target
• what you will do about any gap

Bookmark-worthy tip: prepare a one-page reserves bridge each year (total funds → restricted → designated → free reserves). Keep it with your year-end working papers.

5. Comparative figures and systems need an early look

Because recognition and lease rules are changing, comparative information and opening balances may need more attention than usual. Chart-of-accounts tweaks, fund coding, and lease schedules are easier to fix mid-year than in the week before filing.

A practical 10-point checklist

Use this as a board or finance committee agenda.

1. Confirm your first SORP 2026 period (period start date on/after 1 January 2026).
2. Confirm your reporting tier and diary an annual re-check.
3. Map major income streams and document recognition judgements.
4. Build a lease inventory with key terms and payment schedules.
5. Review restricted funds: are restrictions still accurate and evidenced?
6. Rewrite the reserves note and policy so narrative matches the numbers.
7. Plan the trustees’ report early: do not leave impact wording to the last weekend.
8. Speak to your examiner/auditor about transitional disclosures and comparatives.
9. Check funder reporting: some grants still need cash-basis or project-basis packs alongside SORP accounts.
10. Decide whether threshold changes alter your scrutiny route (independent examination versus audit) for years ending on/after 30 September 2026, and whether a voluntary audit still makes sense for funders.

What “good enough” looks like for a smaller charity

You do not need a 40-page technical paper. You do need:

• clear fund tracking
• documented judgements on income and leases
• a trustees’ report that a new trustee could understand
• working papers that an examiner can follow without detective work

If your bookkeeping is mostly bank feeds and spreadsheets, SORP 2026 is a prompt to tidy coding now, especially restricted income and lease payments.

Common pitfalls to avoid

• Leaving lease data until year-end. Landlords and suppliers are slow to dig out old agreements.
• Treating designated funds as restricted. Designations are board decisions; restrictions come from donors or law.
• Overstating free reserves by forgetting liabilities, designations, or functional fixed assets.
• Copy-pasting last year’s trustees’ report when the accounting basis underneath has moved.
• Assuming “we’ve always done it this way” will satisfy the new notes.

How to use this guide through the year

Print the 10-point checklist. Assign each item an owner and a month. Review progress at two finance meetings before year-end. That single habit prevents most SORP transitions from becoming a scramble.

A 90-day starter plan

If you are starting from a cold stop, do not try to “finish SORP” in one evening.

Days 1–30: diagnose

Confirm period start date and likely tier. Export a list of income codes and top ten funders. Gather lease contracts into one folder. Ask your bookkeeper which funds are restricted in the software versus which are only labelled that way in practice.

Days 31–60: design

Draft income recognition notes for the top five income streams. Build the lease schedule spreadsheet. Sketch the reserves bridge and test it against last year’s accounts. Brief the chair/treasurer on what will look different in next year’s report.

Days 61–90: embed

Update the chart of accounts or fund tags if needed. Diary the trustees’ report writing window. Book a conversation with your examiner or auditor about transitional points. Agree who signs off judgements (finance lead versus board).

Charities that follow this rhythm rarely panic at year-end. Charities that wait for the accounts pack usually do.

Short FAQ

Do we need to restate prior years?

Not always in a dramatic way, but comparatives and opening balances may need more care where recognition or leases change. Ask your reporting accountant early rather than guessing from social media summaries.

We are just above a tier boundary: what should we do?

Plan for the higher tier’s disclosures if income is volatile. It is easier to prepare a stronger report and then scale back than to discover mid-close that you crossed a line.

Our funders want cash reports. Does SORP replace those?

No. SORP accounts and funder returns can both be required. Keep project tracking good enough to serve both audiences.

If you would like a second pair of eyes before year-end, we are happy to help with a SORP readiness review: tier confirmation, income map, lease list, and a draft reserves bridge. Contact us and we can walk through what applies to your charity.

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This article is general information for UK charities preparing accruals accounts. It is not a substitute for tailored advice. Thresholds and effective dates can be updated by government and regulators; confirm the rules that apply to your year-end before you file.