What’s new in charity accounting: the latest confirmed updates

Since our original guide in September 2025, the planned reforms to charity accounting and reporting have moved from proposals to being confirmed and published. These updates will shape how many charities prepare their accounts and reports in the future, so it’s important for VCSE leaders to understand what has changed and what’s coming next.

Final publication of SORP 2026

The big development is that the new Charities Statement of Recommended Practice (SORP 2026) has now been officially published and will apply to reporting periods starting on or after 1 January 2026. This means the framework you were preparing for in our earlier piece is no longer a draft — it’s confirmed and binding for charities preparing accruals accounts.

The core ideas you learned before — including a more proportionate system of reporting — remain central, but there are a few important clarifications and additions:

• Reporting requirements will be staged by income using the three tiers you heard about before: smaller charities with income up to £500,000, mid-sized charities between £500,000 and £15 million, and the largest charities above £15 million.
• Only the largest tier (Tier 3) will generally be expected to prepare a detailed cash flow statement unless required otherwise by wider accounting standards.

The SORP also now includes clearer guidance on specific accounting areas, such as:

• how certain income types should be recognised in your accounts, with examples to help you apply the rules;
• how most leases should be accounted for on the balance sheet; and
• refreshed expectations for Trustees’ Annual Reports, including clearer sections on financial reserves, future plans and aspects of public interest like impact reporting and environmental, social and governance (ESG) information.

Changes to statutory thresholds in charity law

Another confirmed piece of the reform puzzle is that statutory thresholds for independent examination, audit and accounts formats will also change — but these don’t take effect until 30 September 2026 and apply to accounting periods ending on or after that date.

The key changes confirmed by government guidance include:

• the income level at which charities must have an independent examination has risen (e.g., from £25,000 to £40,000);
• the point at which a qualified independent examiner is required has risen (e.g., previously over £250,000, now over £500,000);
• exemptions and options for simpler accounts (such as receipts and payments formats) have been expanded for charities below £500,000; and
• the threshold for a full statutory audit is also increasing, with a corresponding rise in the level at which group accounts must be prepared and audited.

These changes are intended to reduce the accounting burden on smaller charities and make thresholds more consistent with the reporting framework in SORP 2026.

What hasn’t changed

Some things you were preparing for before remain in place:

• the overall move towards tiered, proportionate reporting is confirmed;
• the SORP still applies to charities preparing accruals accounts — and the new rules will be mandatory for those bodies from 2026 onwards; and
• the wider purpose of the reforms — to balance simplicity for smaller organisations with transparency and accountability for larger ones — hasn’t shifted.

What hasn’t yet been fully updated in official guidance is practical detail on exactly how charities should transition from old to new reporting in practice. We know regulators will publish more detailed guidance on the changes closer to implementation, but at the time of writing those supplementary materials are still in development.

What this means going forward

Taken together, these confirmed changes mean that charities should be active in their planning now, not waiting until the end of 2025 or early 2026. While your original preparations were excellent groundwork, there are a few extra things to consider now that the framework is final:

• Match your reporting to tier expectations — knowing which tier you fall into under SORP 2026 and whether your income trend might put you into a different tier next year or the year after.
• Update systems for leases and income recognition — the clearer and more prescriptive examples in the new SORP should help, but they also mean you need reliable data and processes to support your accounts.
• Prepare your Trustees’ Annual Report for the expanded narrative expectations on reserves, future planning and public interest issues.
• Review your examination and audit planning ahead of the threshold changes that take effect from late 2026.

The phased nature of these reforms — SORP 2026 coming first, followed by statutory threshold changes later in the year — means there’s still time to build capacity, review policies and get trustees comfortable with what’s ahead.

Read the Gov.uk guidance on these changes to charity accounting and reporting here.