Upcoming changes to UK company size thresholds and reporting requirements

From April 2025, UK companies and limited liability partnerships (LLPs) will see significant changes to size thresholds and reporting requirements. The changes, introduced through The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024, aim to simplify corporate reporting and reflect inflationary changes since the thresholds were last updated in 2013.

New thresholds

Effective for accounting periods commencing on or after 6 April 2025, the monetary size thresholds for micro, small and medium-sized companies will increase. Businesses meeting any two of the three revised criteria will be eligible for simplified reporting. Key changes include:

*Balance Sheet Total = Total Assets

These increased thresholds will also apply to LLPs.

Implications for businesses

The government estimates that 133,000 companies and LLPs will move into lower-size categories, enabling them to benefit from reductions in reporting and audit requirements:

1. Micro Entities - Exempt from statutory audits, strategic reports and directors’ reports. 
2. Small Entities - Exempt from statutory audits and strategic reports and can adopt simpler accounting rules. 
3. Medium Entities - Eligible for exemptions from certain strategic report requirements, including the Section 172(1) statement. 

A transitional provision in the legislation allows preparers to apply the changes as though they were effective in the previous financial year when determining a particular company size. This removes the need to meet new thresholds for two consecutive years before benefiting from reduced requirements. This means companies and LLPs can benefit from the threshold increase as soon as the legislation comes into effect.

Changes to directors’ reports

To further ease regulatory burdens, the new regulations remove several reporting obligations for eligible large and medium-sized companies, such as: 

• Information on financial instruments.
• Important events occurring since the end of the financial year.
• Research and development.
• Likely future developments.
• Branch operations outside the UK; and
• Employee, customer and supplier engagement. 

Additionally, small entities will no longer be required to report on the employment of disabled individuals.

Additional reforms

The government is also planning further regulatory updates, including amendments to the Directors’ Remuneration Report to remove certain overlapping EU-origin reporting requirements.  The additional reforms are expected to be detailed in early 2025.

As these changes roll out, it’s essential to understand how they might affect your business. If you have any questions or need tailored advice, feel free to reach out for more information.