From April 2025, the UK Government is raising the monetary thresholds that determine company size: annual turnover and balance sheet total. This will reduce reporting requirements for small and medium businesses when filing accounts.
The new legislation, passed in December 2024, is known as The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024. It will take effect for financial years starting on or after 6 April 2025.
Read on to find out more how the changes affect UK companies and how BKL can help.
The effect of the changes
Across the four company size regimes – micro, small, medium and large – the Government estimates that more than 130,000 companies will change their classification to the next regime down:-
| Change | Number of companies expected to be reclassified |
Benefits |
| Large to medium | 6,000 | Exempt from certain Strategic Report requirements including the section 172(1) statement on stakeholder interest
|
| Medium to small | 14,000 | Exempt from statutory audit requirements;*
Filing simpler accounts (under FRS 102 A);
Exempt from producing a Strategic Report
|
| Small to micro | 113,000 | Filing simpler accounts (under FRS 105);
Exempt from producing a Directors’ Report |
*A small company’s exemption from statutory audit requirements may not apply if the company is part of a group, or if the company’s shareholders or bank require an audit. There are other criteria that may mean a small company still requires an audit, listed here.
How the monetary size thresholds will change
To qualify for a specific regime, companies must meet at least two of three criteria, either in their first financial year or in two consecutive financial years. The three criteria are annual turnover, balance sheet total and average number of employees.
This is how the first two criteria will change:
| Micro: | Small: | Medium: | Large: | |||||
| Old | New | Old | New | Old | New | Old | New | |
| Annual turnover
(not more than) |
£632k | £1m | £10.2m | £15m | £36m | £54m | £36m+ | £54m+ |
| Balance sheet total
(not more than) |
£316k | £500k | £5.1m | £7.5m | £18m | £27m | £18m+ | £27m+ |
The current thresholds for average number of employees – none of which are expected to change before further consultation – are:
| Micro: | Small: | Medium: | Large: |
| Not more than 10 | Not more than 50 | Not more than 250 | 251 or more |
Simplifying Directors’ Reports
For medium and large companies producing Directors’ Reports, the new regulations remove various obsolete, low-value or overlapping requirements. The reports will no longer need to include information on:
- Employment of disabled people (this requirement is also being removed for small companies)
- Financial instruments
- R&D expenses
- Branches outside the UK
- Engagement with customers and suppliers
- Engagement with employees
- Important events that have occurred since the end of the financial year
- Likely future developments
How BKL can help
Beyond supporting your business’s reporting and compliance requirements, our specialist advisers are here to help you plan for future opportunities and growth.
Get in touch today for a chat about how the new company size thresholds will affect you and your business ambitions.