From 6 April 2025 an uplift in company size thresholds and reduction in reporting requirements will affect financial statement auditors, companies and LLPs.
Reporting burdens will be reduced for some UK businesses when new government legislation, The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024, comes into effect for financial years beginning on or after 6 April 2025.
The following table sets out the new size thresholds that will be met for a financial year if any two of the three criteria are met.
Micro |
Small |
Medium |
||||
|---|---|---|---|---|---|---|
Current |
New |
Current |
New |
Current |
New |
|
Turnover not more than: |
£632k |
£1m |
£10.2m |
£15m |
£36m |
£54m |
Balance sheet total* not more than: |
£316k |
£500k |
£5.1m |
£7.5m |
£18m |
£27m |
Monthly average number of employees, not more than: |
10 |
10 |
50 |
50 |
250 |
250 |
The increased thresholds also apply to limited liability partnerships (LLPs).
The audit exemption threshold will continue to be coupled with the small company threshold.
The audit exemption threshold will continue to be coupled with the small company threshold
Exemption details
For entities moving into the small entities’ regime, the impact will be significant. They will be exempt from the requirement to have a statutory audit of their annual accounts (subject to implications of group membership) and from producing a Strategic Report. They will also be able to take advantage of simpler accounting requirements. Those moving to the micro entities’ regime will additionally be exempt from producing a Directors’ Report.
Those moving from the large to the medium-sized category will be able to take advantage of exemptions from certain Strategic Report requirements, including a statement on how directors have had regard to stakeholder and other interests listed in section 172, CA 2006, otherwise known as the Section 172(1) statement.
Transitional provisions
The legislation includes a transitional provision for the application of the two-year consecutive rule.
When determining company size for a financial year beginning on or after 6 April 2025, the transitional provision allows preparers to 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. As a result, companies and LLPs can benefit from the threshold uplift as soon as possible after the legislation comes into effect.
The legislation includes a transitional provision for the application of the two-year consecutive rule
Streamlined Directors’ Report
The removal of several obsolete or overlapping requirements relating to the contents of the Directors’ Report mean that 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; and
- engagement with customers and suppliers.
Further information on these changes can be found in the government’s explanatory memorandum.
Additional measures coming
More measures to remove certain overlapping EU-origin reporting requirements from the Directors’ Remuneration Report, as well as to address technical issues in the audit regulatory framework, will be detailed in a separate piece of secondary legislation.
