The charity sector is preparing for some of the biggest reporting and compliance changes seen in recent years.
The final Charities SORP 2026, published in October 2025, introduces a new reporting framework designed to make charity reporting more proportionate, while also increasing transparency and accountability for larger organisations. Alongside this, the Department for Culture, Media and Sport (DCMS) has confirmed updated financial thresholds that will affect audit and reporting requirements from October 2026.
For many charities, these changes could significantly alter both the level of reporting required and whether a statutory audit is needed at all.
A new tiered reporting structure
One of the biggest changes introduced by SORP 2026 is a new three-tier reporting framework.
The aim is to make reporting requirements more proportionate to the size and complexity of each charity, reducing unnecessary administrative burdens for smaller organisations while increasing transparency for larger charities.
Tier 1
Charities with income up to £500,000. These charities will benefit from simplified reporting requirements, helping reduce the administrative burden on smaller organisations.
Tier 2
Charities with income between £500,001 and £15 million. Additional disclosures will be required around governance, reserves and financial sustainability.
Tier 3
Charities with income above £15 million. These charities will face the most detailed reporting requirements, including enhanced disclosures around risk management, social impact, governance and long-term sustainability.
Changes to trustees’ annual reports
The trustees’ annual report will also change depending on which reporting tier the charity falls into.
Smaller charities will still need to clearly explain their aims, activities and public benefit, but the reporting expectations will be more proportionate.
Larger charities, however, will be expected to provide much more detailed narrative reporting, particularly around financial sustainability, governance arrangements, risk management, reserves policies, social and environmental impact, and performance measurement.
Cash flow statements simplified for smaller charities
One welcome simplification is that cash flow statements will only be mandatory for Tier 3 charities and organisations that do not qualify as small entities under FRS 102.
Other key accounting changes
The updated SORP also introduces changes around income recognition and lease accounting, which may affect how charities account for grants, contracts and property arrangements.
New audit and reporting thresholds
Alongside the SORP changes, DCMS has also confirmed increases to several financial thresholds, applying to periods ending on or after 30 September 2026.
Key changes include:
- The independent examination threshold increasing from £25,000 to £40,000
- Professionally qualified independent examiners only being required where income exceeds £500,000
- The accruals accounts threshold for non-company charities increasing to £500,000
- The statutory audit threshold increasing from £1 million to £1.5 million income
- Gross assets threshold increasing from £3.26 million to £5 million
What should charities be doing now?
With threshold changes arriving in September 2026, charities need to act now. Early preparation is essential.
Practical steps charities should consider now include:
- Reviewing contracts, grants and lease arrangements
- Updating trustees’ report templates
- Assessing whether the charity may move between reporting tiers
- Considering the impact of new audit thresholds
- Discussing the changes with auditors and advisers early
- Providing training for finance teams and trustees where needed
Key dates to remember
- SORP 2026 applies to accounting periods beginning on or after 1 January 2026
- Threshold changes apply to periods ending on or after 30 September 2026
How Caldwell Penn can help
At Caldwell Penn, we’re already speaking with our charity clients about what these changes mean in practice and how they may affect future reporting and compliance requirements.
Whether you need help understanding the new SORP requirements, reviewing your reporting obligations or preparing for changes ahead of your year end, our team is here to support you.
