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
What are the changes?
New threshold criteria
The monetary size thresholds for micro, small, and medium-sizedentities 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).
Other key facts
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 permits businesses to treat the new thresholds as if they had applied in the previous financial year, simplifying the process of qualifying for reduced reporting requirements immediately following 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
How should business owners prepare for the changes
Business owners should:
- Evaluate their company’s size status and prepare for reduced reporting obligations
- Examine audit and reporting requirements to identify potential benefits under the new rules.
- Seek guidance on restructuring opportunities, such as streamlining compliance processes or reconsidering voluntary audits.
How CityEdge Can Help
Start preparing for changes now. Contact CityEdge for a get indepth strategic advice and see how we can support the business in making the transition seamless and stress-free.
Stay ahead with CityEdge
Partnering with CityEdge means working with a dedicated, professional team that understands the complexities of VAT and MTD. We bring the expertise and systems necessary to ensure smooth, hassle-free compliance, allowing your business to stay focused on growth and profitability.