The Charities SORP has been updated, and SORP 2026 applies to charities preparing accruals accounts under UK GAAP for accounting periods beginning on or after 1 January 2026.
For trustees, the first year under any revised framework usually needs the most attention. It is worth treating this as a practical planning matter now, rather than a technical adjustment to deal with when the accounts are drawn up.
This matters because reporting expectations often increase as a charity grows, receives restricted funding, operates through more complex structures or faces closer scrutiny from funders and regulators. An annual report and accounts format that worked in previous years may need refreshing to meet the revised requirements.
SORP 2026 also introduces three reporting tiers, so trustees should confirm which tier applies before preparing the annual report and accounts. The tier affects the level of reporting required and is intended to make reporting more proportionate to the charity’s size.
These SORP reporting tiers are separate from the statutory audit and independent examination thresholds, so trustees should check both the SORP reporting tier and the applicable external scrutiny requirement.
The Charity Commission has published guidance on the changes here: Changes to charity accounting and reporting.
Why trustee and senior finance involvement matters
The judgements involved in the first year of reporting benefit from engaged oversight.
Trustees do not need to be technical accounting experts, but they do need to understand the main reporting issues and make sure the annual report and accounts properly reflect the charity’s position.
Senior finance involvement also matters because the revised framework may require information that is not always held neatly in one place. Restricted funds, reserves, future plans, income recognition, lease arrangements and going concern considerations may all need evidence and explanation.
This becomes especially important where:
- The charity is growing or its funding is becoming more complex.
- Restricted or multi-fund reporting is involved.
- There are group structures or trading subsidiaries.
- Governance processes need strengthening.
- Reporting is becoming more judgemental.
- Lease arrangements may need accounting review.
- Income recognition depends on funder terms or contract arrangements.
- Internal finance resources are stretched.
- Trustees need clearer visibility over the financial position.
A good process should help trustees understand the key reporting issues without overwhelming them with unnecessary technical detail.
Common issues to address early
Many first-year difficulties stem from preparation rather than the framework itself.
Common issues include:
- Incomplete bank reconciliations.
- Unclear restricted fund balances.
- Restricted income not being tracked separately.
- Expenditure being charged to the wrong fund.
- Funder conditions not being clearly documented.
- Carried-forward restricted balances not being properly explained.
- Outdated reserves policy wording.
- Weak going concern explanations.
- Related-party transactions not being properly recorded.
- Lease arrangements not being reviewed where relevant.
- Income recognition not being checked against funder or contract terms.
- Inconsistencies between the Trustees’ Annual Report and the accounts.
None of these issues is unusual. Most can be resolved more easily if they are identified before the year end.
The Trustees’ Annual Report deserves a fresh look
The Trustees’ Annual Report should not be treated as a standard document copied forward each year.
Under SORP 2026, it is worth reviewing the report properly. A credible report should clearly explain what the charity exists to do, what activities it carried out, what it achieved, how funds were used, what risks trustees considered, how reserves are being managed and what the charity is planning next.
Good reporting is balanced, specific and honest rather than promotional.
That means the report should not only describe positive activity. It should also give a fair view of the charity’s challenges, risks, financial position and future plans.
Consistency between the narrative report and the financial statements also matters. If the Trustees’ Annual Report describes activity, funding, reserves or risks in one way, the accounts should support that same story.
Reserves and restricted funds need clear explanation
Reserves reporting is one of the areas trustees should review carefully.
Trustees should be able to show:
- What level of free reserves the charity holds.
- Why that level is considered appropriate.
- Whether reserves are above or below target.
- What action trustees are taking where reserves are outside the target range.
- How restricted funds affect the overall reserves position.
The first year under SORP 2026 is a natural point to review the reserves policy wording and check whether it still reflects the charity’s current risks, funding model and future plans.
Restricted funds also need close attention.
Common problems include restricted income not being tracked separately, expenditure being charged to the wrong fund, funder conditions not being clearly documented, carried-forward balances not being properly explained, and differences between internal project reports and statutory accounts.
Getting this clear supports both compliance and more confident conversations with funders. Where restricted reporting is complex, early review can help bring the position into order before the accounts timetable becomes pressured.
Income and lease arrangements may need review
SORP 2026 also brings changes connected to income and lease arrangements.
Not every charity will be affected in the same way, but trustees should consider whether these areas need review before the first accounts are prepared under the revised framework.
Income recognition may need particular care where funding agreements, contracts, grants or performance-related conditions affect when income should be recognised. Trustees and finance teams should make sure the accounting treatment is supported by the underlying documentation.
Lease arrangements may also need review where the charity uses property, equipment or other leased assets. The practical point is not that trustees need to become lease accounting specialists. It is that lease arrangements should be identified early enough for the accounting and disclosure implications to be considered properly.
These issues are easier to manage when they are reviewed before the year end, rather than raised for the first time during audit or independent examination.
Questions to ask before the year end
A short review can help trustees understand whether the charity is ready.
Useful questions include:
- Have we confirmed which SORP 2026 reporting tier applies?
- Are the accounting records up to date and reconciled?
- Are restricted funds reconciled and clearly explained?
- Has the reserves policy been reviewed and updated where needed?
- Have related-party transactions been identified?
- Is the Trustees’ Annual Report being prepared early enough?
- Are income recognition issues understood and documented?
- Have lease arrangements been reviewed where relevant?
- Are there any going concern or cash-flow issues to consider?
- Has the audit or independent examination timetable been agreed?
These questions help trustees move SORP 2026 preparation from a technical year-end task to a managed reporting process.
Confirm the period before changing the accounts
SORP 2026 applies to periods beginning on or after 1 January 2026. For example, a year from 1 April 2025 to 31 March 2026 starts before that date. Separately, the England and Wales scrutiny threshold changes apply to years ending on or after 30 September 2026. Record both assessments so the trustees do not confuse the two tests.
A useful output for the next trustee meeting
Ask for a short transition plan identifying the applicable reporting tier, affected income and leases, records needed, responsible people and completion dates. Confirm who prepares the statutory accounts and who drafts the trustees’ annual report. The finance team can coordinate and review work prepared by an external accountant.
Discuss your next step
Tell us your charity’s year end, funding arrangements and approval timetable. We can discuss audit scope and preparation responsibilities with your finance team and trustees. Explore Accendo’s charity audit service
Reviewed 26 September 2026. General guidance; the appropriate approach depends on your organisation and circumstances.
Charity Commission: September 2026 reporting and scrutiny changes
Related guide: How to prepare your charity for a smoother audit.