Keith Macpherson on the 2026 Charities Statement of Recommended Practice (SORP)
If you run a Scottish charity, the recent announcement from the Scottish Government deserves your attention.
For the first time in more than two decades the audit income threshold has been changed. It comes right on the heels of publication of the final Charities SORP 2026, applying to accounting periods beginning on or after 1 January 2026. Those two developments together will affect how charities prepare accounts and how they are independently scrutinised.
Put simply, if your charity’s income sits between £500,000 and £1 million, your world just got a little more complicated. The audit threshold increase to £1m means more charities in that band may no longer need a statutory audit. But the Charities Statement of Recommended Practice (SORP) that tells charities how to apply UK accounting standards has kept the Tier 1 reporting threshold at £500k, the point at which the most generous reporting exemptions and concessions apply.
In our response to the consultation, Henderson Loggie, like many others, urged the SORP-making body to raise the Tier 1 threshold. That didn’t happen. Trustees must therefore prepare for a landscape where reporting and scrutiny thresholds do not line up neatly. This leaves scope for confusion for trustees where they may see their scrutiny requirements changing if their income is less than £1m, but they are still being required to provide narrative and other disclosure reporting at a similar level to charities with income all the way up to £15m.
Trustees do not need to become accountants, but you do need to be the informed guardians of financial stewardship and request briefings from your finance lead and external adviser that show the numbers.
From a practical governance perspective, you should ask some clear questions sooner rather than later. You will want to know if your charity is modelling the impact of the SORP 2026 changes on your year-end accounts, especially income recognition and lease accounting. Also, if you occupy premises or have a lease at below-market rent, you will want to know how the new lease accounting guidance affects the balance sheet and disclosures. Finally, if your income is between £0.5m and £1m, what will potentially changing from an audit to an independent examination (or vice versa) arrangement mean for your stakeholders and risk appetite.
These changes matter because they affect public confidence and trustee accountability. The reforms are a step forward, but it’s a pity the sector has missed a chance for a coordinated review of financial reporting and scrutiny in Scotland.
Meanwhile, trustees should act now. Get the clear numbers, understand the practical implications, and make a deliberate, documented governance decision that fits your charity’s risk profile and public purpose. If you’d like a sounding board as you navigate this, specialist charity auditors and advisers are ready to help, and trustees should use that help wisely.
Keith Macpherson is partner and charity specialist at Henderson Loggie.
