The Compliance Change That Is Not About MTD
Ask a UK practice owner what has dominated 2026 and you will hear about quarterly updates, Companies House identity verification and the move of anti money laundering supervision to the FCA. Charity clients rarely make that list. They should, because two separate changes have now landed at once.
The first is the Charities SORP 2026, published on October 31st 2025 and effective for accounting periods beginning on or after the 1st of January 2026. The second is a package of increased financial thresholds in charity law for England and Wales, which took effect on the 30th of September 2026 and applies to accounting years ending on or after that date.
In practical terms, a charity with a December 31st 2026 year end is already halfway through its first SORP 2026 period. If your firm prepares those accounts, or carries out independent examinations, the work to get ready needed to start before January.
What SORP 2026 Actually Changes
SORP 2026 reflects the FRC periodic review amendments to FRS 102, then layers charity specific reporting on top. The headline items are:
- A three tier reporting regime based on gross income, replacing the old larger charity approach. Tier 1 covers charities preparing accruals accounts with gross income up to £500,000. Tier 2 covers income above that and up to £15 million. Tier 3 covers income above £15 million, and only Tier 3 charities must prepare a statement of cash flows.
- Lease accounting for lessees. Most leases now come onto the balance sheet as a right of use asset with a corresponding liability. For charities with leased premises, this changes total assets, reserves presentation and any covenant or funder ratio that depends on them.
- Income recognition. The revised five step model applies to contract income, and the SORP adds guidance on grants, performance conditions and legacies. Service contracts with local authorities and multi year restricted grants are the areas most likely to move.
- A refreshed Trustees' Annual Report. Requirements have been tightened around reserves, including how reserves are defined and calculated, plans for the future, impact reporting, and environmental, social and governance matters. Disclosure expectations scale by tier.
- Simplified social investment reporting and clearer requirements for provisions and contingencies.
None of this is optional for charities preparing accruals accounts, and comparatives will need attention on transition.
The Threshold Changes That Start Today
From the 30th of September 2026, for accounting years ending on or after that date in England and Wales:
- Independent examination is required where income exceeds £40,000, up from £25,000.
- Examination by a professionally qualified independent examiner is required where income exceeds £500,000, up from £250,000.
- Non company charities can choose receipts and payments accounts where income is below £500,000, up from £250,000.
- Audit is required where income exceeds £1.5 million, up from £1 million, or where gross assets exceed £5 million, up from £3.26 million.
- Group accounts thresholds rise to an aggregate group income of £1.5 million.
Two consequences follow. Some clients leave scope entirely, which is a conversation about fees and expectations rather than a compliance problem. Others can now step down from accruals accounts to receipts and payments, which removes the SORP burden for them and may be the right recommendation. Scotland and Northern Ireland operate their own regimes through OSCR and the Charity Commission for Northern Ireland, so do not apply these figures across a mixed client base without checking.
A Practical Plan for the Next Eight Weeks
Before Self Assessment season and the next round of quarterly updates absorb your capacity, work through the following:
- Segment the charity list. Tag every charity client by gross income, by tier, by year end and by whether it is a company or a non company charity. This single list drives every other decision.
- Flag the clients whose regime changes. Identify who moves out of examination, who moves out of audit, and who could switch to receipts and payments for a year ending on or after the 30th of September 2026.
- Build a lease inventory now. Request every lease, licence and hire agreement, including photocopiers and vehicles. Gathering documents and getting trustee sign off takes far longer than the calculation itself.
- Review the biggest income streams. Pick the top three funding arrangements for each larger charity and test them against the new recognition guidance before the year end rather than in the audit room.
- Update your Trustees' Annual Report templates by tier, with a proper reserves policy section rather than last year's wording rolled forward.
- Refresh engagement letters and fees. Scope, tier and deliverables have all moved. Where a client leaves statutory scope, agree in writing what you will still do.
- Brief the team and the trustees. A short internal note plus a one page client explainer prevents the same question being answered twenty times in February.
Why This Is Worth Doing Early
Charity work tends to be delivered by a small number of people in a firm, and it competes directly with January. A December 31st 2026 year end will hit desks at exactly the moment quarterly updates, Self Assessment and the post Budget follow up work are all live. The firms that will handle this calmly are the ones that gather lease data, test income recognition and settle tier allocations during October and November.
There is also an advisory opportunity here. Trustees are being asked to report more clearly on reserves, plans and impact, and most boards will want help. Firms that turn SORP 2026 into a structured trustee briefing, a revised reserves policy and a cleaner reporting pack will look considerably more valuable than those that simply file the accounts.
Bringing It Together
SORP 2026 is live, the new thresholds start today, and the first affected year ends are only weeks away. Treat it as a scoping and data gathering exercise now, driven by a clean client list, standard templates and deadlines held in one place in your practice management system. Handled early, this is a manageable piece of planning. Handled in January, it becomes the job nobody wanted.