SORP 2026: understanding the new three-tier reporting framework

The Charities Statement of Recommended Practice (SORP) 2026 introduces a new three-tier reporting framework that will change how many charities prepare and present their accounts. For trustees and finance teams, understanding which tier your charity falls into is the starting point for preparing for the new regime.

This is the first blog in our SORP 2026 series, focusing on the structure that underpins many of the other changes.

What is the three-tier framework?

Under SORP 2026, charities are placed into one of three tiers based solely on their gross income for the financial year. Unlike company law thresholds, there is no two-out-of-three-year averaging. This means charities may move between tiers more frequently.

Tier 1 applies to charities with gross income of up to £500,000. Reporting is simplified, with the option to present income and expenditure by natural classification rather than by activity. Where the charity qualifies as a small entity under FRS 102, it is generally exempt from preparing a statement of cash flows, although this can still be produced voluntarily.

Tier 2 covers charities with gross income between £500,000 and £15 million. These charities must prepare activity-based accounts and provide more detailed disclosures. Many Tier 2 charities will also remain exempt from a cash flow statement if they meet the small entity criteria.

Tier 3 applies to charities with gross income over £15 million. These charities face the most extensive reporting requirements, including a mandatory statement of cash flows and enhanced disclosures around impact, sustainability and volunteer contributions.

Across all tiers, SORP 2026 strengthens going concern disclosures. Trustees must explicitly state whether they consider the charity to be a going concern, explain the judgments made and disclose any material uncertainties.

SORP 2026 also makes it clear that this assessment should be based on forward-looking information. Where trustees conclude that there are no material uncertainties, this judgement must now be stated explicitly, rather than implied. Where material uncertainties do exist, charities are expected to provide clear and specific disclosure explaining the nature of those uncertainties and how they are being managed. This increases transparency around financial resilience and decision-making, particularly for funders, regulators and beneficiaries.

The next step

Monitor your gross income carefully and assess whether you are close to a tier boundary. Early awareness allows time to plan for increased disclosures and system changes. In the next blog in this series, we look at how SORP 2026 changes income recognition and why this may affect the timing of reported income.

Please get in touch with your usual UHY charity adviser if you require any advice regarding the above.

Download our guide

To explore all six changes in one place, download our SORP 2026 guide here. This practical guide brings together the complete picture, with clear explanations and considerations to help charities prepare with confidence.