Charity reserves under SORP 2026: new definition

Charities SORP 2026 changes what trustees can mean when they quote their charity’s reserves. The glossary now includes a definition of reserves, and the trustees’ annual report must compare the reserves held with the reserves policy and explain any gap. For charities preparing accruals accounts, the reserves figure becomes something the board has to understand and be ready to defend. This article explains what has changed and what trustees of charities in Liverpool, Manchester and across the North West should do before their first SORP 2026 accounts.

When does SORP 2026 apply to your charity?

SORP 2026 applies to financial years beginning on or after 1 January 2026, according to the Charity Commission’s accounts guidance. A charity with a 31 December year end applies it to its 2026 accounts. A charity with a 31 March year end applies it first to the year ending 31 March 2027. It is separate from the new audit and independent examination thresholds, which apply to financial years ending on or after 30 September 2026.

The reporting requirements are split into three tiers based on income, as the SORP-making bodies’ summary of changes explains. Tier 1 covers charities with income below £500,000, Tier 2 covers income up to £15m and Tier 3 covers charities above that, according to Civil Society. The detail expected in the trustees’ annual report increases with each tier.

Preparation is uneven. A Charity Finance Group survey of 101 charities found that 19% had not started preparing and only 4% described themselves as fully prepared.

What counts as reserves under SORP 2026?

The summary of changes confirms that a definition of reserves has been added to the glossary. Trustee Central’s guide to the Tier 1 report describes it as the part of a charity’s income funds that is freely available to spend on any of its purposes. Money tied up in fixed assets or earmarked in designated funds is unlikely to be freely available. A reserves figure quoted on a looser basis in previous years may therefore come out lower on the new one.

The Commission’s reserves guidance, CC19, was updated on 16 September 2026. Its central message is unchanged: there is no single level of reserves that is right for every charity. A target, or a decision not to hold reserves, should reflect the charity’s own circumstances and be explained in the policy.

What the trustees’ annual report must now include

The financial review section carries most of the new reserves requirements. The report must:

state the reserves policy, the amount of reserves held at the year end and why they are held, or why there are none
explain how the reserves figure is calculated where that is not evident from the accounts
compare the reserves held with the policy and, where they differ, say what the charity is doing about it

The comparison with policy is new for charities of every size, according to Trustee Central’s reading of paragraph 1.39. The HFMA’s briefing lists the financial review paragraphs, 1.35 to 1.43, that cover financial position, reserves policy and going concern.

Going concern and plans for the future

The SORP-making bodies say more guidance has been included on the going concern basis of preparation. Charities with no reserves or with negative net assets must explain why they are still operating as a going concern, according to Charity Digital’s guide to SORP 2026.

Every charity must also summarise its plans for the future, and impact reporting is now a requirement for all charities rather than a recommendation. The plans, the reserves position and the going concern assessment should sit consistently alongside each other, because a reader will test one against the others.

Leases on the balance sheet

Most leases are now recognised as a right-of-use asset with a matching lease liability, with exemptions for short-term and low-value leases, as ICAEW’s guidance on preparing for SORP 2026 explains. Premises occupied rent-free or at a discount raise their own questions under SORP 2026. Balance sheet totals will grow, so any ratio or covenant calculated from them is worth checking before the year-end figures are final.

Questions for trustees

What is our reserves figure on the SORP 2026 definition, and how does it compare with the figure we have quoted before?
Does our reserves policy explain why we hold the amount we do, and is it linked to the risks on our register?
If reserves are below policy, what is the plan to close the gap, and who owns it?
Which of our leases come onto the balance sheet, and do any funder or lender ratios depend on figures that will change?
Do our plans for the coming year line up with the going concern assessment?

Frequently asked questions about charity reserves under SORP 2026

What is the SORP 2026 definition of reserves?

Reserves are the part of a charity’s income funds that is freely available to spend on its purposes. Funds tied up in fixed assets or earmarked in designated funds are unlikely to qualify.

Do all charities have to report on reserves under SORP 2026?

Charities preparing accruals accounts under the SORP must state their reserves policy and the reserves held, and compare the two, whatever their tier. The level of detail increases with income.

When does SORP 2026 start?

It applies to financial years beginning on or after 1 January 2026.

What must a charity say if it has no reserves?

A charity with no reserves or with negative net assets must explain why it is still operating as a going concern, and the trustees’ annual report should set out the reasons the charity holds no reserves.

Talk to our charities team

UHY Williamson Croft’s charities and not-for-profit team supports trustees and finance teams across Liverpool, Manchester and the Wirral with SORP 2026 reporting, audit and assurance and accounts preparation. To discuss your reserves policy or reporting, get in touch or call Taylor Rogers on 0161 399 0121 (Manchester) or 0151 303 3112 (Liverpool).

Charity reserves under SORP 2026: the new definition and what the trustees’ annual report must say