Could your company size threshold change in April?

From 6 April 2025, the Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 will introduce higher company size thresholds, reducing compliance burdens for thousands of UK businesses.

The changes will affect financial reporting requirements, statutory audit obligations, and Directors’ Reports.

New threshold criteria

The monetary size thresholds for micro, small, and medium-sized entities are increasing, reflecting inflation and reducing reporting complexity.

A business will fall into a category if it meets at least two of the three criteria.

Micro entities:

• Turnover – Up to £1m (Up from £632,000)
• Balance sheet total – Up to £500,000 (Up from £316,000)
• Monthly average number of employees – 10 (No change)

Small entities:

• Turnover – Up to £15 million (Up from £10.2 million)
• Balance sheet total – Up to £7.5 million (Up from £5.1 million)
• Employees – 50 (No change)

Medium entities:

• Turnover – Up to £54 million (Up from £36 million)
• Balance sheet total – Up to £27 million (Up from £18 million)
• Employees – 250 (No change)

These new thresholds also apply to LLPs (limited liability partnerships).

Impact on businesses

The Government estimates:

• 113,000 companies will move from small to micro-entity status.
• 14,000 will shift from medium-sized to small.
• 6,000 will move from large to medium-sized.

This will mean fewer reporting obligations and lower compliance costs for businesses moving down a category.

Audit exemptions

• Businesses newly classified as small will no longer need a statutory audit (unless part of a group that requires one).
• Micro entities will also be exempt from Directors’ Reports.

Simplified accounting requirements

• Moving from medium to small means exemption from the Strategic Report requirement.
• Those moving from large to medium will no longer need to include a Section 172(1) statement in their Strategic Report, which details how directors have considered stakeholders’ interests.

Transitional provisions

A key provision in the legislation allows businesses to assume that the new thresholds applied in the previous financial year, making it easier to qualify for reduced reporting requirements immediately after the rule change.

Changes to Directors’ Reports

From April 2025, large and medium-sized businesses will no longer need to include certain details in their Directors’ Report, including:

• Financial instruments
• Important post-year-end events
• Future developments
• Research and development (R&D)
• Overseas branches
• Employment of disabled people (also removed for small entities)
• Employee and customer engagement

What should business owners do now?

With the changes just a few months away, business owners should:

• Review their company size status and plan for reduced reporting obligations.
• Assess audit and reporting requirements to determine whether they can benefit from the new rules.
• Seek advice on restructuring opportunities – For example, using these changes to simplify compliance processes or reconsidering voluntary audits.

Simon Nuttall

If you need support understanding what these changes mean for your business, contact our expert accountants today.