Trustees’ Annual Report – what will change under SORP 2026?

The much awaited SORP 2026 was released on 31 October 2025 and, as expected, it is applicable for accounting periods starting on or after 1 January 2026. There are some changes to the Trustees’ Annual Report that you might want to start thinking about now, even if the first time your charity applies it will be for your 2027 year end.

In some respects the biggest change is the new tier system; this sets out the disclosure requirements which increase depending on the size of your charity:

• Tier 1 – charities with income up to £500,000
• Tier 2 – charities with income over £500,000 up to £15,000,000
• Tier 3 – charities with income over £15,000,000

Tier 1 reporting is applicable to all charities; tier 2 charities have extra disclosures to cover and then for tier 3 charities another layer of requirements is added.

There are four key themes, none of which are new concepts, which are applicable to all tiers:

• Linkage of the narrative in the Trustees’ Annual Report to the notes to the financial statements;
• Consistency with financial statements;
• Consideration of who are the users of the financial statements and what are their needs of them;
• Trustees Annual Report should be fair, balanced and understandable.

This article focuses on the main changes that apply to the content of the report.

Volunteers

Many charities rely significantly on their volunteers and it is important for users of the accounts to understand this. Under SORP 2026, additional information will need to be provided in the Trustees’ Annual Report in respect of volunteers. All charities must include an explanation to disclose the scale and nature of activities undertaken by different volunteers in their reporting. Those charities in Tier 2 and 3 should also include information on the number of general volunteers and activities supported by those general volunteers and may include volunteer hours or staff equivalents where practical to do so.

It should be noted that there continues to be a difference in accounting treatment between general and non-general volunteers and we will pick this up in our article on the changes to revenue recognition in due course.

Objectives and activities

For Tier 1 charities the review of activities in the should be consistent with the analysis of expenditure within the notes to the accounts. For many charities this may be a significant change to how they present this information in the Trustees’ Annual Report. Accounting software capabilities may drive this presentation in the SOFA and notes to the accounts, and charities should discuss this with those that prepare the financial statements to gain an understanding of how the notes can be presented, before defining how the narrative is presented.

Charities in Tier 2 and 3 must provide the user of the financial statements with a more detailed understanding of the short and long term aims and objectives and how those in the short term relate to those in the longer term. A helpful series of questions for charities to ask themselves has been included in the SORP to aid authors of the Trustees’ Annual Report, to ensure that they are meeting the requirements.

Achievements and performance – including impact

All charities must provide a summary of the main achievements of the charity and the SORP encourages the use of infographics, statistics and testimonials to demonstrate this. The SORP also provides two questions which should be considered when preparing this summary, to help explain the impact that charity is making:

• In what way has the charity’s work made a difference to the circumstances of its beneficiaries?
• Has the charity’s work provided any wider benefits to society as a whole?

Charities in Tier 2 and 3 must also explain the long-term effect of its activities on individual beneficiaries and society as a whole and the use of impact stories is encouraged to communicate this.

Financial review

The calculation of “free” reserves has always been an area of much debate and helpfully the glossary of the new SORP includes a clear definition of reserves and specifically what should be excluded. It is also now a requirement to include a reconciliation from unrestricted funds to the calculation of reserves (either within the funds note or a separate note) if it is not clear how the charity’s reserves tie into the financial statements. This is a helpful addition as for some charities this calculation is not straightforward.

Whilst previously only recommended, all charities must now compare their actual reserves to the reserves policy and explain action being taken to align with the policy. If a charity has designated funds or otherwise committed funds at the year end, then they must explain the expected timing of the expenditure in the future.

Tier 2 and 3 charities will have to expand their description of principal risks to include any arising from environmental and cyber issues. The management and governance of these areas is then picked up in the new Sustainability section which we cover below.

There has not previously been a requirement to include information about legacy income but, where charities have recognised material legacy accruals at the year end, these must now be explained to allow the readers to better understand the impact of the difference in the timing of income shown in the SOFA compared to receipts in current and future cashflows.

Plans for future periods

Whilst previously only a requirement for larger charities, all tiers are now required to provide a summary of the charity’s plans for the future and it may be helpful to include reference to the charity’s reserves and going concern assessment as part of this.

In addition, tier 2 and 3 charities must still give details of the future activities planned to achieve its aims and objectives and they are also encouraged to explain how past experience has influenced future plans and decisions.

Sustainability

This new section feels relatively light touch compared to what the requirements could have been. All charities are encouraged to explain how they are responding to and managing environmental, social and governance matters, and to consider the needs of their stakeholders for reporting on this area; though it is not a must for tiers 1 and 2.

For the Tier 3 charities who must include a summary of their response and management of these matters, examples are given for the details and KPIs which could be reported.  Many of these larger charities will already be reporting on this area as a result of separate reporting requirements under company legislation and the SORP references to these key legislative requirements.

We often see the content of a Trustees’ Annual Report being written by trustees, management and staff working together. It is important that all those involved are aware of the new requirements and in particular those that are relevant to the size of your charity. SORP 2026 is encouraging charities to properly demonstrate how they deliver impact and plan for the future, and so we encourage you and your team to think ahead, collate testimonials, track KPIs and use this as an opportunity in your report to not only set out your performance for the year but to really show users how your charity makes a difference.

If you would like assistance from one of our experts with any of the changes in SORP 2026 or want guidance on preparing your Trustees’ Annual Report, get in touch to discuss how to plan ahead and present your charity’s impact effectively.