Charities & Not for Profit
News - Charities & Not for Profit
6 October 2026
From financial years ending on or after 30 September 2026, the Charity Commission’s revised financial thresholds and the new Charities SORP take effect. For many charities and their trustees, this isn’t a distant compliance date on the horizon, it’s happened. If your charity’s year end falls on or after 30 September, the new rules apply to the accounts you’re about to prepare.
The headline change is a significant uplift in the income thresholds that determine how a charity must account and report. The threshold for preparing accruals (rather than receipts and payments) accounts rises from £250,000 to £500,000 of gross income. The threshold above which an independent examination is required moves from £25,000 to £40,000. And the audit threshold increases from £1 million to £1.5 million gross income, or £500,000 gross income combined with gross assets of £5 million or more.
In practice, this means a number of charities that were previously required to have an independent examination, or a full statutory audit, will no longer be obliged to do so, though many will choose to retain a higher level of scrutiny voluntarily, particularly where funders, lenders or grant-making bodies expect it.
The Charities SORP 2026 goes further than raising the numbers. Charities will need to apply a more structured, five-step approach to income recognition, distinguishing more carefully between exchange transactions (contracts to deliver goods or services) and non-exchange transactions (donations and grants) — a change that brings charity accounting closer to mainstream commercial practice under FRS 102.
Lease accounting is also changing significantly: most leases will now need to be brought onto the balance sheet, which could affect a charity’s apparent financial position and any covenants attached to loans or funding agreements. Trustees’ annual reports face enhanced expectations too, with a stronger emphasis on impact reporting alongside the traditional financial narrative.
The first practical step is establishing which reporting tier your charity now falls into under the revised thresholds, since this determines the form your accounts must take and the level of external scrutiny required. Charities should also review income streams and material contracts to identify where the new five-step recognition model changes the timing or classification of income, and assess existing leases to understand the balance sheet impact before it appears as a surprise in draft accounts.
Because the new SORP applies to accounting periods starting on or after 1 January 2026 (with the Commission’s revised registration thresholds taking effect for years ending on or after 30 September 2026), transitional arrangements and comparative figures need early attention — this is not something to leave until the accounts are being finalised.
For trustees and finance teams, the sensible response is to treat this as an opportunity rather than purely a compliance burden: a chance to review reporting processes, strengthen financial narrative, and reassure funders and beneficiaries that governance keeps pace with regulatory change. Charities with September year ends should be looking at this now; those with later year ends have a short but useful window to prepare.