Charity accounting changed twice in 2026. A new Charities SORP applies to reporting periods beginning on or after 1 January 2026, built around three tiers by income. And the thresholds moved: from 30 September 2026 the audit threshold in England and Wales rises to £1.5 million, accruals accounts are required above £500,000, and independent examination starts at £40,000.
The new SORP and its three tiers
Charities SORP 2026 applies to reporting periods beginning on or after 1 January 2026. The previous edition — the SORP (FRS 102) Second Edition — covers periods beginning on or after 1 January 2019 and before that date.
The structural change is a tiered framework, applying across all UK nations, which scales requirements by income:
- Tier 1 — income up to £500,000;
- Tier 2 — income between £500,000 and £15 million;
- Tier 3 — income over £15 million.
Alongside the tiers come new requirements for recognising and reporting certain types of income and lease arrangements, and greater expected transparency from larger charities. The lease changes follow the wider FRS 102 revisions and will be the substantive work for many charities with property.
The thresholds that moved
The Charities Acts 1992 and 2011 (Substitution of Sums) Order 2026 — SI 2026/427, made 17 April 2026 — comes into force on 30 September 2026, and applies to financial years ending on or after that date. Note the date: earlier consultation material said 1 October, and that was superseded.
For England and Wales, the position before and after:
- Receipts and payments accounts permitted for non-company charities — income of £250,000 or less becomes £500,000 or less;
- Accruals (SORP) accounts required — above £250,000 becomes above £500,000;
- Independent examination required — above £25,000 becomes above £40,000;
- Professionally qualified examiner required — above £250,000 becomes above £500,000;
- Audit required — income above £1m, or above the accounts threshold with assets over £3.26m, becomes income above £1.5 million, or income above £500,000 with gross assets over £5 million;
- Group accounts audit — aggregate group income of £1m becomes £1.5 million.
These raised thresholds apply to England and Wales only. Scotland and Northern Ireland retain the existing £250,000 accruals threshold, though the SORP's three-tier framework is UK-wide. A charity operating across borders cannot apply one set of numbers everywhere.
For charities sitting just above the old lines, the practical effect is real: a charity with £1.2m of income and modest assets moves from audit to independent examination, which is a materially smaller engagement. The saving is worth checking against the year end, because the change bites by reference to financial years ending on or after 30 September 2026.
Filing and the annual return
The annual return must be submitted within 10 months of the end of the financial year. What it contains depends on income:
- Under £10,000 — report income and spending only;
- £10,000 to £25,000 — answer the annual return questions, with no documents to attach;
- Over £25,000 — the annual return plus the trustees' annual report, the accounts, and the examiner's or auditor's report where one is required, together with a serious incident declaration.
The trustees' annual report
Every charity's report covers the registered name and any other names used, the registration number, the address of the main office, the trustees' names, the governing document, the charity's purposes, its main activities and achievements in the year, a financial review including the reserves policy and the amounts held, and a statement that the trustees have had regard to the Commission's public benefit guidance.
Larger charities preparing audited accruals accounts add fundraising disclosures: use of professional fundraisers and commercial participators, Fundraising Regulator registration, compliance with the Code of Fundraising Practice, complaint numbers, and the measures taken to protect vulnerable people.
For years beginning on or after 1 January 2026 the report must follow the SORP 2026 structure, with defined sections: objectives and activities; achievements and performance; financial review; plans for future periods; structure, governance and management; reference and administrative details; sustainability; exemptions from disclosure; and funds held as holding trustee.
The sustainability section is new and will need thought rather than a paragraph borrowed from last year. So will the reserves policy, which is the disclosure most often criticised — a policy stating a target range without explaining how it was derived, or naming a figure the charity has not been near for three years, invites the question it was meant to answer.
Getting the transition right
Three things decide whether this is smooth. Fix the reporting period first, because SORP 2026 applies by reference to periods beginning on or after 1 January 2026 while the thresholds apply to years ending on or after 30 September 2026 — two different tests, and a charity can be caught by one and not the other.
Second, work out your tier and read the requirements for it rather than the SORP as a whole. Third, if the threshold change moves you out of audit, decide deliberately rather than by default: some funders and some governing documents require an audit regardless of the statutory position, and dropping one you are contractually committed to is an expensive discovery.
Acumon works with charities and not-for-profits through charity audit, charity accounts and charity accounting, with not-for-profit audit and independent examination alongside — see also our guide to not-for-profit accounting. If your income sits between £1m and £1.5m, your year end decides whether you need an audit this year.