Getting ready for the new Charities SORP 2026: what it means for faith-based charities

A significant change to charity accounting has arrived. The new Charities SORP 2026 — published in October 2025 — applies to accounting periods beginning on or after 1 January 2026, so, depending on your year-end, your first set of accounts under the new rules is either being prepared now or coming very soon. It is the most substantial update to the charity accounting rulebook in years. The good news, especially for the many smaller faith-based charities, is that it is built on a "think small first" principle that keeps the requirements proportionate. This guide explains what is changing, what it means for faith-based charities specifically, and how to get ready. It is general information, not advice — take advice from your accountant or independent examiner on your own accounts.

What is the SORP, and what's changing?

The Statement of Recommended Practice (SORP) is the rulebook that sets out how charities should prepare their accounts — it supplements FRS 102, the UK's core accounting standard, with charity-specific guidance. Most charities that prepare "accruals" accounts follow it.

SORP 2026 is a major refresh, driven largely by underlying changes to FRS 102. The headline structural change is a new three-tier system, and there are important changes to how income and leases are accounted for, plus new requirements on impact and volunteers.

The new three tiers — which one are you?

The new SORP scales what's required to the size of the charity:

• Tier 1 — income up to £500,000: the simplest reporting. Most faith-based charities sit here.
• Tier 2 — income £500,001 to £15 million: more detailed disclosures.
• Tier 3 — income above £15 million: the most comprehensive reporting, including mandatory ESG disclosures.

The principle is "think small first" — so if you're a small charity, the burden is designed to be proportionate. Do check which tier you're in, and take care if your income is near the £500,000 line, as it affects what you must disclose.

What's changing — the key points

Income recognition

There's a new model for recognising income, based (with simplifications) on the international five-step approach. The practical upshot: where income comes with performance conditions — typically grants and contracts that require you to do something before you can keep the money — that income must be deferred until the conditions are met. Straightforward donations, offerings and collections are largely unaffected, but restricted or conditional grants need careful handling (this connects to understanding your restricted, unrestricted and designated funds).

Leases on the balance sheet

This is the change most likely to catch faith organisations out. Under the new rules, most leases must go on the balance sheet — you recognise a "right-of-use" asset and a matching lease liability, rather than simply expensing the rent. Crucially, this includes careful consideration of peppercorn and nominal leases — arrangements where the rent is a token amount such as £1 a year. Faith communities very often occupy buildings, halls and premises on exactly these kinds of nominal or shared arrangements, so this is an area to look at closely and take advice on.

Impact reporting is now mandatory

Reporting your impact — the difference your charity makes — is no longer optional; it is now a required part of the annual report for all charities. For faith-based organisations, this is less a burden than an opportunity: a chance to tell the story of the good you do, well.

Volunteers must be recognised

For the first time, charities must describe the contribution of their volunteers in the Trustees' Annual Report — including, where reasonably possible, volunteer hours, the types of work they do, and the value they add. Faith-based charities run on volunteers, so this matters — and, again, it's a genuine chance to make visible the enormous contribution your people make. Start capturing that information now.

Lighter touch for the smallest

For Tier 1 charities there are welcome simplifications — you can present income and expenditure by natural classification (donations, grants, trading, investment income), and a full cash flow statement is only required for Tier 3 charities (income above £15m).

What it means for faith-based charities

Put together, the picture for most faith charities is reassuring but not "do nothing." The reassurance: you are probably Tier 1, and "think small first" keeps things proportionate. The three areas that most warrant attention are:

1. Your building arrangements — peppercorn, nominal and shared-premises leases now need proper consideration.
2. Conditional income — restricted grants and contracts with performance conditions must be recognised correctly.
3. Your volunteers — you now have to describe their contribution, so start recording it.

And the mandatory impact reporting is a real opportunity to showcase your mission.

How to get ready — a practical checklist

1. Confirm your tier by looking at your income.
2. Review your income streams — flag any grants or contracts that carry performance conditions.
3. List your leases — especially peppercorn, nominal and shared-building arrangements — and take advice on how they're now treated.
4. Start capturing volunteer data — hours, roles and the value they add.
5. Plan your impact reporting — decide how you'll tell your story.
6. Check your accounting software and systems are ready for the new requirements.
7. Talk to your accountant or independent examiner early — well before your year-end.
8. Plan the transition — opening balances and comparatives need thought.

The bottom line

SORP 2026 is a genuine change, but not one for smaller faith-based charities to fear. "Think small first" keeps it proportionate; the areas to get on top of are your leases (especially peppercorn arrangements on buildings), your conditional income, and recording your volunteers — and the new impact reporting is a chance to tell your story better than ever. Prepare early, take advice from your accountant or independent examiner, and what looks daunting becomes very manageable — and even an opportunity to report your charity's work, and its people, well.

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This article is general information, not advice. The SORP is detailed and its application depends on your charity's size, structure and circumstances — always take professional advice from your accountant or independent examiner. For help preparing SORP-compliant accounts, or with your independent examination, get in touch.

Sources verified (July 2026):

• Charities SORP microsite — The Charities Statement of Recommended Practice (SORP) — https://www.charitysorp.org/
• ICAEW — Charities SORP 2026 (summary of changes) — https://www.icaew.com/technical/charity-community/resources/accounting-and-reporting/charities-sorp-2026
• Charity Commission / OSCR / CCNI — Charities SORP (the joint SORP-making body) — https://www.gov.uk/government/publications/charities-sorp-2026
• Financial Reporting Council — FRS 102 (the underlying standard, including revenue and lease changes) — https://www.frc.org.uk/