Changes to UK company size thresholds
6 April 2025
On December 2024 ‘The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024’ were laid before Parliament and will come into force on 6 April 2025. These regulations change the UK company size thresholds.
Transitional provision removing two-year consecutive rule
A transitional provision in the legislation means that if the size criteria apply in the current financial year then they are also deemed to have applied in the previous financial year. As a result companies and LLPs are able to apply the benefits of the threshold size change in their first accounting period beginning on or after 6 April 2025 if they meet the two year test by applying the new limits to earlier years (even if they didn’t qualify as small for those years using the old limits).
New thresholds
If a company or LLP meets any two out of the three criteria in a financial year they can apply the resultant reduction in reporting requirements.
Remember that there are certain types of companies not allowed to take advantage of this regime as set out in s.384 (companies excluded from the small companies regime), s.384B and s.467 (companies excluded from being treated as medium-sized) of the Companies Act 2006.
Companies and LLPs moving into the small entities regime will have simpler accounting requirements, will no longer need to produce a Strategic report and will be exempt from audit (subject to their governing document and any group membership implications). This audit exemption will be of huge benefit to small non-charitable companies and small LLPs.
Those moving from large to medium sized will have a simpler Strategic report removing the requirement to include a statement on how directors have had regard to stakeholder and other interests listed in section 172, CA 2006 (Section 172(1) statement).
The table below sets out the new size thresholds that will be met for a financial year if any two of the three criteria are met:
| For companies and LLPs
Two of three: |
Micro | Small | Medium | Large |
| Annual turnover £ | ≤1M | ≤15M | ≤54M | >54M |
| Balance sheet total £ | ≤500K | ≤7.5M | ≤27M | >27M |
| Average number of employees | ≤10 | ≤50 | ≤250 | >250 |
| For groups ignoring elimination of intra group transactions
Two of three: |
Small | Medium | Large |
| Annual turnover £ | ≤18M | ≤64M | >64M |
| Balance sheet total £ | ≤9M | ≤32M | >32M |
| Average number of employees | ≤50 | ≤250 | >250 |
The balance sheet total refers to gross assets and the number of employees criteria has remained unchanged in the new limits.
As a reminder the existing thresholds for companies and LLPs are:
| Two of three: | Micro | Small | Medium | Large |
| Annual turnover £ | ≤632K | ≤10.2M | ≤36M | >36M |
| Balance sheet total £ | ≤316K | ≤5.1M | ≤18M | >18M |
| Average number of employees | ≤10 | ≤50 | ≤250 | >250 |
Changes to Directors reports:
In addition, large and medium-sized entities can exclude the following from their Directors’ Report:
- financial instruments
- important events that have occurred since the end of the financial year
- likely future developments
- research and development (R&D)
- branches outside the UK
- the employment of disabled people
- engagement with employees (as covered under s172 statement requirements)
- engagement with customers and suppliers (as covered under s172 statement requirements)
However, some of these may still be needed in other parts of the accounts and reports, e.g. the strategic report.
These changes will be welcomed, as the Economic Crime and Corporate Transparency Act 2023 introduced a new corporate offence for failing to prevent fraud; however, this currently applies only to large entities. Please speak to us for more detail on the precise changes that will affect your entity as a result.
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We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.