The company size thresholds have been increased, along-side the removal of certain regulatory requirements from the Directors’ Report and Remuneration Report. These changes will come into effect for financial years commencing on or after 6 April 2025.
Why the change?
Company size thresholds, as defined in the Companies Act 2006, have not been revised since they were last updated in 2015.
Static thresholds have resulted in more companies being drawn into reporting requirements than was originally intended.
Increasing the company size thresholds is a step towards ensuring the corporate reporting framework is proportionate – reducing the size and complexity of annual reports for smaller companies.
What are the changes?
There are 3 classifications of company size that businesses have to consider when preparing their accounts – small, medium or large. For small companies there is also a sub-classification called a micro-entity.
For financial years starting on or after 6 April 2025, thresholds on company size will increase as follows. These will also apply to limited liability partnerships.
| Micro | Small | Medium | ||||
| Current | New | Current | New | Current | New | |
| Turnover not more than | £632k | £1m | £10.2m | £15m | £36m | £54m |
| Total assets 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 |
Companies that move down a size category will have their reporting and audit requirements reduced as follows.
Those moving down into the small companies category will be:
- Exempt from the requirement to have a statutory audit of their annual accounts;
- Exempt from producing a Strategic Report; and
- Able to take advantage of simpler reporting requirements.
Those moving down in the micro-entity category will also be:
- Exempt from producing a Directors’ Report.
Those moving down into the medium-sized category will be:
- Able to take advantage of exemptions from certain Strategic Report requirements.
The new legislation includes a transitional period that enables companies to treat the changes as having been applied in the previous financial year when determining company size. This is to bypass the ‘two year consecutive rule’ which requires size thresholds to be satisfied only once the company has met those thresholds in two successive financial years.
Several requirements will also be removed from the Directors’ Report, Large and medium-sized entities will no longer need to include 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.
How M+A Partners can help
Our experienced Accounts and Audit teams are well-placed to advise you on your company reporting requirements. Should you have any queries on the new measures due to be introduced from April 2025, please get in touch with your usual M+A Partners’ contact or email enquiries@mapartners.co.uk
