The 2026 Charity SORP: What churches and Christian charities need to know

The much-anticipated new Statement of Recommended Practice for charities (SORP) was published in November 2025. 

The SORP only applies to those charities which prepare accrual accounts. It gives guidance on how they should apply accounting standards consistently and meaningfully. This new version comes in response to recent changes in UK accounting standards, particularly FRS 102.

Many of the changes introduced in the new SORP had been widely anticipated, particularly those which affect the accounting treatment of leases and recognition of income.

Other changes which were less anticipated include a new three tier structure based on charity income. 

• Tier 1 will apply to charities with income up to £500,000
• Tier 2 will apply where income is between £500,000 and £15 million
• Tier 3 where income is over £15 million.

Only tier 3 charities will now have to include a cash flow statement in their accounts where previously this was required from all charities with income over £500,000. A summary of how the main requirements differ between the different tiers is included at the end of this article.

The two main changes we expect to impact churches and mission charities are lease accounting and the content of trustees’ annual reports.

Lease accounting

Most leases will move from being reported as a simple annual expense to being recognised on the balance sheet as both a right-of-use asset and a lease liability.

This change will likely increase both assets and liabilities on the balance sheet.

The only exemptions to this requirement, which come from the underlying financial standard FRS 102, are for:

• short-term leases: leases with a term of 12 months or less at the commencement date
• low-value assets: items such as personal computers, small items of office furniture, tablet devices and telephones. (Land and buildings, motor vehicles, or heavy plant do not qualify for the low-value exemption.)

Trustees’ report

The detail required to be disclosed in the trustees’ report has been substantially increased. There is now more clarity around how reserves should be defined and all charities will be required to outline their plans for the future (previously only large charities had to do this). There is also more guidance on assessing going concern and there is a requirement to state how the charity is responding to issues around the sustainability of the environment.

Perhaps one of the most significant changes introduced is the increased requirement to report on the impact the charity has had during the year covered by the accounts. This reporting will give details of what a charity has achieved, not just financially but also in terms of the difference made. All charities regardless of their size will have to include details of the way in which the charity’s work has improved the life experience of its beneficiaries and of how the charity’s work has provided wider benefits to society as a whole.

In addition, those charities with income over £500,000 will also have to give details of how performance has been assessed and the outputs achieved by particular activities.

While such detail will be readily available for many charities, there will be others for which this might prove more difficult. Many churches might not see for many years, if ever, the results achieved in later life by individuals who attended worship as a child.

The opportunities that a church gives for worship, prayer and Bible study provide benefits that might never be known to anyone other than those who participated in those particular activities.

This is clearly an area that will require much thought before the requirements of the new SORP are implemented. Churches will often not be able to use simple metrics as some other charities will, but it does give an opportunity to explain the ‘marks of the Gospel’ that demonstrate the impact of the church in more foundational ways. This would be a benefit to many church annual reports where we have seen a simple annual repetition of a few activities without any indication of impact!

On a clearly positive note, the SORP committee are encouraging trustees’ reports which are specific to each individual charity. This will give charities an opportunity to tell their story and say more about the work they are doing.

Getting ready for the new requirements

The new SORP does, of course, only apply to those charities preparing accrual accounts and will apply to accounting periods beginning on or after 1 January 2026. For most charities, that will mean that the first accounts to be affected will be those being prepared in 2027. 

In the meantime, church and charity treasurers and finance teams should familiarise themselves with the requirements and start to prepare for the changes. Now is the time to start to gather the information and details which will help with impact reporting, with the new lease accounting requirements and with the reporting on sustainability.

Stewardship will be returning to these issues in the future as we prepare for implementation.

Donors, funders, regulators and the public want to see not just how money is spent, but what difference is made. The new SORP helps charities show that in a structured, consistent and rigorous way.

Appendix: Tiers 1 and 2 differential impacts on reporting

The reporting requirements for tiers 1 and 2 are designed to be more proportionate to their size and complexity, compared to tier 3 charities.

The core information required for all tiers focuses on aims, achievements, future plans, reserves policy and the going concern assessment.

Key requirements for tier 1 charities

Income threshold: Gross income up to £500,000.

• Cash-flow statement: Exemption from preparing a cash-flow statement.
• Disclosures: Simpler format for some disclosures.
• Impact reporting: Must include a short section on impact, explaining how their work has made a difference.
• Reserves: Must include a summary of reserves and a reserves policy.
• Governance: Must provide a basic explanation of their governance arrangements.
• Going concern: Must explain why they are considered a going concern, especially if they have no reserves or negative net assets (see also below).

Key requirements for tier 2 charities

Income threshold: Gross income is more than £500,000 but not more than £15 million.

• Trustees' annual report: Charities must answer specific questions about their short-term and long-term aims, how the year's achievements contributed to those aims and the impact of their activities.
• Cash-flow statement: Exemption from preparing a cash-flow statement (like tier 1 charities)
• Reserves policy: The report must explain how the charity's financial reserves are reconciled with the balance sheet and outline any actions being taken to align reserves with the policy.
• Sustainability and impact: While the most detailed sustainability reporting is in tier 3, charities in tier 2 are still expected to report on the impact of their activities and can choose to provide sustainability disclosures.

Specific additional disclosure areas, such as detailed Environmental, Social and Governance (ESG) reporting or a full Statement of Cash Flows, are mandatory for tier 3 but are only encouraged as optional disclosures for charities in tiers 1 and 2. 

This suggests that while the basic going concern principle is required for all, the depth of the supporting evidence and narrative in the public-facing annual report might be less granular for tiers 1 and 2, allowing for a more streamlined report.