Understanding the new SORP will be crucial to preparing your charity’s next trustees’ annual report. At a recent training session hosted by CFG, Helena Wilkinson took attendees through all the important changes relating to trustees' annual reports. Emma Abbott reports.
More than 700 charity professionals attended two online training sessions in November to understand the significant changes coming to trustees' annual reports under the new Charities SORP (Statement of Recommended Practice).
The sessions – hosted by CFG and expertly led by charity and governance specialist Helena Wilkinson – provided vital guidance on the requirements that will apply to all accounting periods beginning after 1 January 2026.
The training comes at a crucial time. The last major SORP update was in 2015, and the new framework introduces substantial changes to annual reporting requirements. Most notably, the SORP now classifies charities into three tiers based on gross income, with reporting requirements varying according to tier placement.
Understanding the new tier system
The session covered how charities will be classified under the new three-tier structure. Tier 1 applies to organisations with gross income up to £500,000 (the former 'small charity' category). Tier 2 covers charities with income between £500,000 and £15 million, aligned with small companies' income thresholds. Tier 3 includes all organisations exceeding £15 million in gross income.
One important point raised was that tier placement is based strictly on annual gross income, with no transition period for organisations moving between tiers. This means charities experiencing income fluctuations, particularly through legacy income, could find themselves subject to different disclosure requirements from one year to the next.
Calculating gross income correctly
Determining gross income is not as straightforward as it might seem. The definition varies depending on jurisdiction and whether accounts are prepared on a receipts and payments or accruals basis. For accruals accounts, the Charities Act 2011 defines it broadly as recorded income from all sources, including special trusts.
The Charity Commission clarifies this as total income from the statement of financial activities, less any endowments received, plus any amounts transferred to income from endowments. OSCR's definition is similar but also allows exclusion of third-party income collected and passed on to other organisations. Given these subtle differences, charities balancing on tier thresholds should seek clarification from their regulator to ensure correct classification.
Telling your story: vision, mission and strategic planning
Helena emphasised the importance of how charities structure their trustees' reports. The SORP was already reordered so that objectives and activities come first, reflecting a fundamental shift in thinking about what readers need to know.
"Who are you? What do you do? Why do you do it? What are you hoping to achieve, and where are you heading?" asked Helena, outlining the key questions that reports should answer upfront.
For Tiers 2 and 3, charities must now explain both shorter and longer-term objectives, moving from what was previously a 'should' to a 'must'. This means clarifying not just current activities, but the ultimate vision that would make the organisation redundant if fully achieved. They must explain how well their activities have performed and their impact.
Helena used the example of a homelessness charity evolving from providing immediate street support to offering longer-term solutions like skills training and housing support.
Charities must also explain their criteria for measuring success and how they adapt activities based on what's working. This strategic thinking helps readers understand why organisations choose certain activities over others when resources are limited.
Financial review: new mandatory requirements
The financial review section has seen substantial changes, with several previous 'shoulds' becoming 'musts' for all charities regardless of tier. All organisations must now review their financial position at year end, with this review being consistent with the financial statements.
Key mandatory disclosures for all tiers include explaining the reserves policy in detail, with the reserves figure either clearly identifiable in the accounts or reconciled through a clear explanation. Charities must identify all material designated funds, explaining why they exist, how they represent committed amounts and when they will be spent. Those with negative or nil reserves must explain how they remain a going concern, and any material uncertainties must be disclosed.
For Tiers 2 and 3, additional requirements include explaining principal income sources and how these are spent, expanding principal risk disclosures to cover environmental issues and cyber security, and detailing where investment policies include social, environmental and ethical considerations. Where material legacy income appears in debtors, charities should explain the expected timing of receipt.
The training stressed that reserves policies should go beyond simple statements like 'three months’ income', instead explaining how the figure was derived, what income risks were considered, and how the policy supports organisational sustainability. Many organisations are now moving toward target ranges rather than single figures, giving readers clearer understanding of whether reserves are at comfortable levels.
Volunteers under the spotlight
All charities, regardless of tier, must now explain the scale and nature of activities undertaken by volunteers. This change recognises that many charities depend heavily on volunteers whose contributions aren't captured in financial statements. Tiers 2 and 3 organisations are encouraged to quantify volunteer hours or express them in staff equivalents.
Sustainability and other changes
Tier 1 charities must now include summary plans for the future, a new requirement for smaller organisations. Meanwhile, Tier 3 charities face new obligations around sustainability reporting, that should cover environmental, social and governance matters including data security, wellbeing and board diversity.
The training also covered exemptions from disclosure, noting that the SORP has removed the previous requirement to explain why a trustee's name, CEO's name, staff member's name or address has been withheld. However, charitable companies should remember that FRS 102 still requires disclosure of registered address and principal places of business in the notes to accounts.
The importance of early preparation
The scale of changes introduced by the new SORP means early preparation is essential.
Helena encouraged charities to review their current reports against new requirements and begin collecting necessary data immediately. The training emphasised that organisations should view their annual reports as opportunities to tell their story effectively, using colour, pictures, and infographics to engage readers.
For many charities, particularly those in Tiers 2 and 3, the shift to mandatory impact reporting is likely to require new data collection systems, revised measurement frameworks, and potentially significant changes to how they communicate their work. Starting this process now gives organisations time to test approaches and build the evidence base needed for robust reporting.
CFG’s training also highlighted that these changes do not exist in isolation. With proposed threshold increases still awaiting parliamentary approval and the SORP-making body potentially reviewing tier thresholds during 2026, the landscape remains fluid.
Helena’s advice was clear: "Don't panic, but start the process now rather than later."
Future learning opportunities
This article is based on a training session delivered by CFG with the support of Helena Wilkinson. It is not intended as comprehensive training content.
CFG will continue to support the sector through this transition with additional SORP clinic sessions from early 2026, offering smaller group settings where professionals can discuss specific challenges and questions with experts. See details below.
For those facing the most significant reporting changes, these opportunities to learn from peers and specialist advisers may prove invaluable in navigating the new requirements confidently.
We encourage you to read the Charities SORP 2026 and speak to your auditors or other advisors about your charity’s specific circumstances.
New for 2026! Interactive SORP clinics
Join CFG's interactive, online SORP clinics in 2026!
Led by trusted expert partners and designed to provide practical insights and knowledge, CFG's new SORP clinics will give you the tools you need to understand and work with SORP 2026.
Each session brings together small groups of up to 35 participants, creating an environment for knowledge sharing, open discussion and peer learning.
When?
To book your place, click on the above links. If you have any questions, please email the team.
