The publication of the Charities SORP 2026, in turn based on the revised FRS 102, along with uplifts to various thresholds for many charities depending on the jurisdiction, marks one of the most significant overhauls of UK charity reporting in over a decade.
In this blog, we take a look at some of the key changes to be aware of.
Key changes
1. The SORP
- Three-tier reporting: One of the most significant changes in the 2026 SORP is the introduction of a three-tier reporting framework based on a charity’s gross income. Under this model:
- Tier one will apply to charities with gross income not exceeding £500,000.
- Tier two will apply to those with income above £500,000 but not exceeding £15 million.
- Tier three will cover charities with income greater than £15 million.
Each tier carries different expectations for reporting, with tier three being the most demanding. Alongside the introduction of the new tiered approach, the underlying narrative reporting requirements themselves have been revisited, with the information needing to be included in the Trustees’ Report being revised to enhance the value of information presented to stakeholders.
This new structure aims to balance the need for accountability with the administrative burden placed on smaller charities and responds to long-standing sector feedback that smaller organisations need a more proportionate approach to financial reporting.
- Lease accounting: Lease accounting under FRS 102 has undergone major reform, introducing IFRS 16-style requirements which mean most leases will now have to be brought onto the balance sheet as both a right-of-use asset and a corresponding lease liability. As it will with other types of entity, this will fundamentally change how charities present their assets and liabilities, improving transparency but requiring additional effort, particularly for charities with complex lease arrangements. As a helping hand, a new SORP module, 10B, has been introduced, which gives examples of different types of lease arrangements which charities may be party to and how they would be accounted for under the new requirements (such as for nominal and peppercorn rental, which can be more common for charities).
- Enhanced disclosures on ex-gratia payments: The requirements for disclosing ex-gratia payments have been strengthened. Whilst such payments could previously have been aggregated ‘where this does not impact on the understanding of the arrangement’, this is now only the case where it relates to legacies.
Non-legacy ex-gratia payments can no longer be aggregated. This is explained in paragraph B.78 as being to ‘improve transparency over these transactions’.
2. Updated thresholds
- England and Wales: Following a consultation in 2025, a wide-ranging (and, many would argue, overdue) update has been made to various thresholds applicable to charities in England and Wales which saw significant increases in a number of cases, the more notable of which are as follows:
|
Requirement |
Current threshold |
New threshold |
|
Accounts must be independently examined |
Income over £25,000 |
Income over £40,000 |
|
Examination must be by a professionally qualified Independent Examiner |
Income over £250,000 |
Income over £500,000 |
|
Non-company charities can choose to produce receipts and payments accounts |
Income below £250,000 |
Income below £500,000 |
|
Accounts must be audited |
Income over £1,000,000 Assets over £3,260,000 |
Income over £1,500,000 Assets over £5,000,000 |
|
Group accounts must be prepared and audited |
Aggregate income of the group £1,000,000 |
Aggregate income of the group £1,500,000 |
The new thresholds will apply to financial years ending on or after 30 September 2026.
- Scotland: In March 2025, the Scottish government announced plans to amend the audit income threshold for Scottish charities to £1 million. This is effective for reporting periods commencing on or after 1 January 2026. Clearly, this was a much narrower scope of revisions than those seen in England and Wales and still leaves a gap between the audit requirements in the different jurisdictions, along with the gap for other thresholds increasing.
- Northern Ireland: Breaking with the trend in the rest of the UK, there are currently no plans for the audit thresholds applicable to Northern Ireland charities to be increased. Instead, the sole change was to increase the threshold for charities required to register with CCNI. At the time of writing, all charities still need to register, but once the registration threshold is in place, only charities above the following limits will be required to do so:
- charities with annual income of £20,000 or less, and;
- assets of £100,000 or less.
Conclusion
The introduction of the 2026 Charities SORP represents a fundamental shift in charity reporting, whilst the revised thresholds for UK charities (particularly those in England and Wales) will mean a large number of charities should see their administrative burdens lightened.
While some of the changes - such as lease accounting - may require significant technical adjustments, others create an opportunity for charities to better communicate their impact and purpose to their stakeholders and the wider public. Therefore, it’s important to take time to understand how the changes will impact each charity based on its own unique circumstances and, crucially, how this can be utilised to improve transparency and quality in the annual report.
How can Mercia help?
Mercia offers a range of training courses and support products including specialist charities manuals to aid compliance with the regulations. We also offer a comprehensive technical query service for advice on your specific circumstances.