Is your company size about to change? What April’s new thresholds mean for you

Big changes are coming to the way UK businesses are classified – and for many, that means fewer compliance headaches.

From 6 April 2025, the Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 will introduce new size thresholds, potentially shifting thousands of businesses into a different reporting category.

If your company falls into one of these categories, you could see changes in your financial reporting, audit obligations, and Directors’ Reports.

New company size thresholds

To account for inflation and ease compliance, the Government is increasing the financial thresholds that define micro, small, and medium-sized businesses. Companies will be classified based on meeting at least two of the three following criteria:

Micro entities:

Turnover – Up to £1 million (previously £632,000)

Balance sheet total – Up to £500,000 (previously £316,000)

Employees – 10 (unchanged)

Small entities:

Turnover – Up to £15 million (previously £10.2 million)

Balance sheet total – Up to £7.5 million (previously £5.1 million)

Employees – 50 (unchanged)

Medium entities:

Turnover – Up to £54 million (previously £36 million)

Balance sheet total – Up to £27 million (previously £18 million)

Employees – 250 (unchanged)

These thresholds also extend to LLPs (limited liability partnerships), meaning many businesses will experience a considerable change to their compliance obligations.

What this means for your business

The Government estimates that:

113,000 companies will move from small to micro-entity status.

14,000 will shift from medium to small.

6,000 will transition from large to medium-sized.

For these businesses, the changes mean streamlined reporting and lower administrative burdens.

Moving to a smaller category can bring significant benefits, particularly around audit requirements and financial disclosures.

Here are the key compliance changes.

Audit exemptions

Companies newly classified as small will no longer require a statutory audit unless they are part of a group that still does.

Micro entities will also be exempt from preparing Directors’ Reports.

Simplified reporting requirements

Medium-sized businesses moving to small status will no longer need to prepare a Strategic Report.

Large businesses reclassified as medium-sized will no longer need to include a Section 172(1) statement in their Strategic Report, reducing the disclosure burden on directors.

Changes to Directors’ Reports

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

Financial instruments

Significant post-year-end events

Future developments

Research and development (R&D) activity

Overseas branches

Employee and customer engagement

Employment of disabled people (this requirement is also being removed for small businesses)

Transitional provisions – Immediate benefits

A key provision in the new legislation allows businesses to apply these thresholds retrospectively to the previous financial year.

This means companies can immediately benefit from reduced reporting obligations once the new rules take effect in April.

What should business owners do now?

With the implementation date fast approaching, make sure that you:

Assess your company’s classification – Review whether your business will be affected by the new thresholds.

Plan for reduced reporting requirements – Consider how these changes will impact your financial statements and compliance obligations.

Re-evaluate audit needs – If your business no longer requires a statutory audit, decide whether you should continue voluntarily for financial transparency.

If you need help adapting to these new regulations, our team of expert accountants is here to guide you. Contact us today for assistance.