News
UK to Raise Company Size Thresholds Starting April 2025
23 Jan 2025
New regulations revising company size thresholds will take effect from April 2025. The changes, introduced through The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024, aim to simplify compliance, reduce reporting burdens, and account for inflation since thresholds were last updated in 2013.
Updated Size Thresholds
From 6 April 2025, the monetary thresholds for micro, small, and medium-sized entities will increase. A Company or LLP will qualify for a size category if it meets at least two of the three criteria below:
| Micro | Small | Medium | ||||
| Current | New | Current | New | Current | New | |
| Turnover not more than: | £623k | £1m | £10.2m | £15m | £36m | £54m |
| Balance sheet 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 |
Impact of the Revised Thresholds
The government projects that the new thresholds will lead to the following shifts:
- 113,000 companies and LLPs moving from small to micro-entity status.
- 14,000 companies and LLPs moving from medium-sized to small status.
- 6,000 companies and LLPs moving from large to medium-sized status.
Advantages for Smaller Entities
Entities reclassified into a smaller size category will benefit from notable reductions in reporting and audit obligations:
- Small Entities: Exempt from statutory audit requirements (with group membership considerations) and the need to prepare a Strategic Report. Simpler accounting options are available.
- Micro Entities: Exempt from preparing a Directors’ Report and simplified accounting options available.
- Medium Entities: Exempt from specific Strategic Report requirements, such as the Section 172(1) statement regarding stakeholder engagement.
The legislation introduces a transitional provision related to the application of the “two-year consecutive rule.” For financial years starting on or after 6 April 2025, this provision permits preparers to treat the new thresholds as if they had been in effect during the prior financial year. This retrospective application is limited to the two-year rule. Consequently, companies and LLPs can take advantage of the threshold increase immediately after the legislation is implemented.
Streamlining the Directors’ Report
The new regulations simplify Directors’ Report requirements for medium and large entities by removing the obligation to report on:
- Financial instruments.
- Significant events occurring after the financial year.
- Likely future developments.
- Research and development activities.
- Non-UK branches.
- Employment of disabled individuals (this also applies to small entities).
- Employee engagement.
- Customer and supplier engagement.
The government’s explanatory memorandum offers more information on these changes.
Forthcoming Reforms
Additional updates will address Directors’ Remuneration Report requirements and resolve technical issues within the audit framework. These measures are expected in a separate regulation scheduled for early 2025.
How WR Partners Can Help
If you are unsure about the new regulations surrounding the new company size thresholds, contact our team today at hello@wrpartners.co.uk or call 08000 664 664.
