SORP 2026 Exposure Draft – Are you ready for tiered reporting?
Please note: This blog is based on the SORP 2026 exposure draft published in March 2025. The final version of the SORP is subject to consultation and may have changes to the draft positions outlined below. The new SORP is the biggest change for all charities in a decade and we encourage all charity clients to read the exposure draft and submit a response to the survey.
You can do that here:
Tiered reporting- are you ready to step up?
The long awaited exposure draft charity statement of recommended practice for 2026 (SORP) has finally landed, and with it comes a major change in the structure of how charities report in their accounts. Although in the past the Charity Commission has made some room for differences in the way it treated its definition of ‘small’ and ‘large’ charities, it has now proposed a three tier structure with some clear reporting guidelines for each.
The three tiers are as follows:
Tier 1 – Charities applying accruals accounts with gross incomes of up to £500,000.
Tier 2 – Charities with incomes of between £500,000 and £15m.
Tier 3 – Charities with incomes above £15m.
These new tier thresholds are designed to align more closely with the newer Companies Act reporting standards for small, medium and large companies that were updated for periods commencing after April 2025.
Some of these changes mean welcome respite from the need for smaller charities to prepare cashflow statements for example. However, care should be taken to ensure all the other provisions relating to size within the Companies Act thresholds such as number of employees are considered as other size limits for companies might still be breached. Paragraph 35 on page 18 of the exposure draft notes this clearly.
Why do this?
The SORP has long been criticised for applying all its standards in full to almost every charity preparing accruals accounts with little thought given to smaller organisations who have limited resources to prepare accounts and collect data. No charity Trustee or Finance Director can have failed to notice the sheer size and page numbers of charity accounts increasing over the past few years – so the idea of a tiered approach will be welcomed by many as long as it remains proportionate.
During the draft consultation period it will be important to get the views of as many charities of varying size as possible to allow the Commission to consider if the tiers are broadly supported or if there are requirements that place too great a burden on the reporting element.
How will it affect my charity?
The majority of the tiered requirements affect the Trustees Report module. For example there are new sustainability requirements in the Trustee Report – for tier 1 and 2 charities this is a simple summary of efforts being made but for larger tier 3 charities there are significant points around key performance indicators, governance and social policies too such as board diversity. This could mean significant extra reporting for many organisations.
Other key changes in the report include plans for future periods. This section is often a short summary in many charities but tiers 2 and 3 will require additional commentary from the trustees perspective on future direction of the charity, how decisions are made and resources allocated.
In the main disclosure notes there are new options to use ‘natural’ or ‘activity’ based reporting classifications in section 4; whilst section 9 offers tier 1 charities some changes in employee disclosures if using the natural basis.
Many heavily redrafted sections such as income in section 5 still apply to all tiers of charity. There is a useful table in section 1.11 of the exposure draft for the application of many trustee report requirements across the tiers.
What can I do about these changes?
The new SORP is applicable to charities for reporting periods beginning on or after 1 January 2026; so there is time yet to consider the changes and how they affect your organisation. The consultation however ends very shortly on the 20th June 2025. Please do take part on the link at the top of this blog.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.
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