The Government has announced plans to raise the monetary thresholds that determine company size: annual turnover and balance sheet total. Via legislation expected in Summer 2024, this will reduce reporting requirements for small and medium businesses when filing accounts.
The effect of the changes
Across the four company size regimes – micro, small, medium and large – the Government expects more than 130,000 companies to change their classification to the next regime down:
| Change | Number of companies that will be reclassified | Benefits |
| Large to medium | 5,000 | More proportionate reporting |
| Medium to small | 13,000 | Exemptions to statutory audit requirements; ability to file simpler accounts |
| Small to micro | 113,000 | Filing simpler accounts |
How the 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 are due to 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 |
Other changes to simplify company reporting
The Government has also announced plans to:
- Remove various obsolete, low-value or overlapping requirements from the Directors’ Report, and from the Directors’ Remuneration Report and Policy
- Make the issuing of digital annual reports simpler for businesses
- Fix some technical issues in the audit regulatory framework
The Government’s next steps
Following the setting out of legislation this summer, the Government intends for companies to apply the new thresholds to financial years starting on or after 1 October 2024.
Later this year, the Government intends to consult on:
- Increasing the medium companies’ employee threshold from not more than 250 to not more than 500
- Exempting medium companies from having to produce a strategic report
- exempting smaller public interest entities from audit tendering and rotation requirements.
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.
If you’d like to have a chat about how the new company size thresholds will affect you and your business ambitions, please get in touch with your usual BKL contact or use our enquiry form.
