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United Kingdom: Company Size Thresholds Set to Increase from April 2025
The UK government has adopted and published new legislation, the Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024, which will bring significant changes to company size thresholds and reporting requirements.
Key Changes
1. Effective Date:
The new regulations will come into effect from April 2025.
2. Increased Thresholds:
Company size thresholds will be raised, potentially altering compliance requirements for many businesses.
3. Directors’ Report:
Certain requirements will be removed from the Directors’ Report.
Impact on Businesses
These changes will affect accounting periods commencing on or after the 6th of April 2025. Companies that previously qualified under the old limits may find themselves in a different category, potentially benefiting from reduced compliance requirements.
Transitional Provision
For financial years beginning on or after the 6th of April 2025, companies can assume the new thresholds were applicable in the previous financial year when determining company size. This provision allows companies to benefit from the threshold uplift immediately after the legislation comes into effect.
New Size Thresholds
| Micro | Small | Medium | Large | |
|---|---|---|---|---|
| Annual turnover | Not more than £1m | Not more than £15m | Not more than £54m | More than £54m |
| Balance sheet total | Not more than £500k | Not more than £7.5m | Not more than £27m | More than £27m |
| Average no. of employees | Not more than 10 | Not more than 50 | Not more than 250 | More than 250 |
New size thresholds for group entities. For parent companies, the following group thresholds will apply:
| Small | Medium | Large | |
|---|---|---|---|
| Annual turnover | Not more than £18m | Not more than £64m | More than £64m |
| Balance sheet total | Not more than £9m | Not more than £32m | More than £64m |
| Average no. of employees | Not more than 50 | Not more than 250 | More than 250 |
Key Benefits for Reclassified Companies
- Small Entities: Exempt from statutory audit requirements (subject to group membership implications) and producing a Strategic Report. Simpler accounting requirements apply.
- Micro Entities: Additional exemption from producing a Directors’ Report.
- Medium-sized Entities: Exemptions from certain Strategic Report requirements, including the Section 172(1) statement.
Reduced Reporting Requirements
Large and medium-sized entities will no longer need to include the following in their Directors’ Report:
- Financial instruments information
- Post-year-end important events
- Likely future developments
- Research and development activities
- Branches outside the UK
- Employment of disabled people (also removed for small entities)
- Engagement with employees, customers, and suppliers
Action Points for Companies
1. Evaluate your company’s classification under the new thresholds.
2. Assess potential exemptions and simplified reporting opportunities.
3. Plan for changes in reporting and compliance requirements.
4. Consider the impact on group structures and subsidiaries.
Next Steps
Companies should carefully review these changes and consider how they may affect their reporting obligations for financial years beginning on or after the 6th of April 2025.
For more information or assistance in navigating these changes, please contact mercator@citco.com.
