In our 2026/27 Charity and NFP Sector Outlook round-up, we flagged that the finalised Charities SORP 2026 was bringing a new three-tier reporting framework, leases onto the balance sheet, and rising audit thresholds. Those points came from a wider guide covering the whole sector outlook, so here we’re going back over the detail – the actual income bands, the specific new threshold figures, and what finance teams and trustees at charities across Liverpool and Manchester need to do about each one.

A new three-tier reporting framework

The previous SORP treated charities in two broad bands. SORP 2026 replaces this with three tiers based on gross income, with disclosure and Trustees’ Annual Report requirements scaling up at each level – the largest charities, for example, will now need to report on environmental matters, something not previously required at all. The requirements are cumulative, so a Tier 3 charity must also meet everything expected of Tiers 1 and 2.

For finance teams, the practical effect is that the size of your charity now determines not just your audit route, but the depth of narrative reporting expected in your annual report.

Leases move onto the balance sheet

The most technically significant accounting change comes from revisions to FRS 102, which SORP 2026 incorporates. Most operating leases will now need to be recognised on the balance sheet as a right-of-use asset, with a matching liability reflecting the discounted value of future payments – a change that mirrors, but doesn’t exactly replicate, the IFRS 16 treatment already familiar from the commercial sector. Any charity renting premises, vehicles, or equipment under an operating lease should expect this to affect both their balance sheet and their year-one transition workings. (Our sector outlook round-up also covers why this change means dilapidations provisions deserve fresh attention – worth a read alongside this piece if leased premises are a live issue for your charity.)

Income recognition is also changing, moving to a five-step approach. In practice this is likely to have less impact on donations and legacies, which are non-exchange transactions recognised when reliably measurable, but grants – particularly those with performance conditions – may need closer analysis to determine whether they are exchange or non-exchange transactions.

Trustees must now report on impact

Perhaps the most novel change is a new expectation that all charities explain their impact – covering both direct impact on beneficiaries and their broader contribution to society – within the Trustees’ Annual Report. This moves impact reporting from a “nice to have” to a mandatory narrative requirement, and is worth flagging to trustees well ahead of their next reporting cycle, since it isn’t simply an accounting change finance teams can absorb alone.

When it applies: SORP 2026 takes effect for accounting periods beginning on or after 1 January 2026 – so a charity with a 31 December year end faces this for their 2026 accounts, while a charity with a 31 March year end has until their year ending 31 March 2027.

Thresholds are rising from 30 September 2026

Separately – but landing at almost the same time – the income thresholds that determine a charity’s accounting and scrutiny requirements are also increasing from 30 September 2026:

  • The threshold for preparing accruals accounts (rather than simpler receipts and payments accounts) rises from £250,000 to £500,000.
  • The trigger for needing an independent examination is increasing.
  • The audit threshold is also rising, meaning some charities currently required to have a full statutory audit will become eligible to opt for the independent examination route instead.

This is genuinely good news for charities sitting near the old thresholds, but it means any reserves policy, budget, or governance documentation that references the old figures will need revisiting.

What this means for charities in Manchester and Liverpool

For local charities and academy trusts, the practical priority list looks like this:

  1. Identify your tier under the new three-tier framework and understand what it means for your Trustees’ Annual Report.
  2. Audit your leases – premises, vehicles, equipment – and start modelling the balance sheet impact of right-of-use recognition.
  3. Review grant agreements for performance conditions that might affect income recognition timing.
  4. Check where you sit against the new thresholds from 30 September 2026, and whether your scrutiny requirements are changing.
  5. Brief your trustees on the new impact-reporting expectation – this is a governance conversation as much as a finance one.

Charities that start this work now, well ahead of their first affected year end, will find the transition considerably smoother than those who leave it until the accounts are due.