The UK government has now confirmed an increase to the company size thresholds, effective from 6 April 2025. This change is part of a broader initiative to simplify financial reporting and reduce the administrative burden on companies.
What are the new thresholds?
The new regulations, outlined in The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024, will see the monetary size thresholds for micro, small, and medium-sized entities increase significantly. Here are the key changes:
Micro-entities:
- Turnover: Increased from £632k to £1m
- Balance sheet total: Increased from £316k to £500k
- Employees: Remains at 10
Small entities:
- Turnover: Increased from £10.2m to £15m
- Balance sheet total: Increased from £5.1m to £7.5m
- Employees: Remains at 50
Medium-sized entities:
- Turnover: Increased from £36m to £54m
- Balance sheet total: Increased from £18m to £27m
- Employees: Remains at 250
Impact on businesses
These changes are expected to have a significant impact on many businesses. The government estimates that around 113,000 companies and LLPs will move from the small to micro-entity category, 14,000 from medium-sized to small, and 6,000 from large to medium-sized. This reclassification will allow many businesses to benefit from reduced reporting and audit requirements.
For example, companies moving into the small entities regime will be exempt from the requirement to have a statutory audit of their annual accounts and from producing a Strategic Report. Those moving to the micro-entities regime will additionally be exempt from producing a Directors’ Report.
Benefits of the new thresholds
The increase in thresholds is designed to:
- Reduce Complexity: Simplify the financial reporting process for smaller companies.
- Cut Costs: Lower the administrative and compliance costs associated with financial reporting.
- Reflect Inflation: Adjust for the impact of inflation since the previous thresholds were set in 2013.
Preparing for the change
We recommend that all businesses review their current classification and consider how these changes might affect their reporting requirements.
If you have any questions or need assistance with your financial reporting, please do not hesitate to contact us. Our expert team is here to guide you through the complexities of regulation and compliance, ensuring that you meet your statutory obligations. For further information, please get in touch with a member of our team by emailing enquiries@pmm.co.uk or calling 01254 679131.
Written by Claire Layton, Audit Director.
