UK Company Size Thresholds Rise: Key Changes in Accounts

UK has officially increased company size thresholds effective from 6 April 2025, following the enactment of The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024. This update adjusts the monetary thresholds for micro, small, and medium-sized entities, aiming to reflect inflationary changes since the last revision in 2013 and to reduce the reporting burden on companies.​

New Company Size Thresholds (Effective from 6 April 2025):

A company qualifies for a size category if it meets at least two of the following three criteria:​

  • Micro-entities:
    • Turnover: Not more than £1 million (previously £632,000)
    • Balance Sheet Total: Not more than £500,000 (previously £316,000)
    • Employees: Not more than 10​
  • Small Companies:
    • Turnover: Not more than £15 million (previously £10.2 million)
    • Balance Sheet Total: Not more than £7.5 million (previously £5.1 million)
    • Employees: Not more than 50​
  • Medium-sized Companies:
    • Turnover: Not more than £54 million (previously £36 million)
    • Balance Sheet Total: Not more than £27 million (previously £18 million)
    • Employees: Not more than 250​

Impact on Reporting Requirements:

The increase in thresholds is expected to reclassify numerous companies into lower size categories, thereby reducing their reporting obligations:​

  • Approximately 113,000 companies and LLPs will shift from the small to micro-entity category.
  • Around 14,000 will move from medium-sized to small.
  • About 6,000 will transition from large to medium-sized.​

Companies moving to a smaller category may benefit from:​

  • Simplified financial statements.
  • Reduced disclosure requirements in directors’ reports.
  • Potential exemption from mandatory audits.​

Changes to Directors’ Report Requirements:

In an effort to further lessen the UK’s regulatory burden, particularly with regard to non-financial reporting, the new regulations also remove several obsolete or overlapping requirements relating to the contents of the Directors’ Report. Large and medium-sized entities will no longer be required to include in their Directors’ Report information on:​

  • Financial instruments.
  • Important events that have occurred since the end of the financial year.
  • Likely future developments.
  • Research and development.
  • Branches outside the UK.
  • The employment of disabled people (this requirement is also being removed for small entities).
  • Engagement with employees.
  • Engagement with customers and suppliers.​

Transitional Provisions:

To facilitate a smooth transition, the legislation includes a provision allowing companies to apply the new thresholds retrospectively for the purpose of the “two-year rule.” This means that when determining company size for a financial year beginning on or after 6 April 2025, companies can assume that the new thresholds had been applicable in the previous financial year. This look-back is only available for the application of the two-year rule, enabling companies and LLPs to benefit from the threshold uplift as soon as possible after the legislation comes into effect.​

Next Steps for Businesses:

Companies should assess their classification under the new thresholds to determine applicable reporting obligations. It’s advisable to consult with accounting professionals to ensure compliance and to take advantage of any available simplifications in reporting.