Understanding the UK's Updated Company Size Thresholds: What Businesses Need to Know
In a significant move to simplify business reporting and reduce administrative burdens, the UK government has increased the financial thresholds that define micro, small, and medium-sized companies. These changes, effective from 6 April 2025, are part of the Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024.
📊 New Size Thresholds
To qualify for a specific size category, a company must meet at least two out of the three criteria: turnover, balance sheet total (gross assets), and number of employees, for two consecutive years. The updated thresholds are as follows:
Category Turnover (≤) Balance Sheet Total (≤) Employees (≤)
Micro £1 million £500,000 10
Small £15 million £7.5 million 50
Medium £54 million £27 million 250
Note: These thresholds apply to financial years beginning on or after 6 April 2025.
📈 Impact on Businesses
The new thresholds are expected to benefit approximately:
113,000 companies moving from small to micro-entity status
14,000 companies transitioning from medium to small
6,000 companies shifting from large to medium
These changes allow businesses to take advantage of lighter reporting requirements, such as:
Audit exemptions for eligible small companies
Simplified financial statements
Exemptions from preparing a Strategic Report
Reduced disclosures in the Directors’ Report
Note: Companies can apply the new thresholds immediately for financial years starting on or after 6 April 2025, using prior-year figures, without waiting for two consecutive years of meeting the criteria.
📝 Changes to Directors’ Report
To further reduce the regulatory burden, several disclosure requirements have been removed from the Directors’ Report for accounting periods beginning on or after 6 April 2025. These include:
Disclosures concerning the employment of disabled persons
Financial instruments and related risks
Existence of branches outside the UK
Employee engagement and engagement with suppliers/customers/others
Significant events after the balance sheet date
Likely future developments
Research and development activities
Note: Some of these disclosures may still be required elsewhere within the annual report or the notes to the financial statements to ensure compliance with accounting standards or regulations.
🔄 Transitional Provisions
The legislation includes a transitional provision for the application of the “two-year consecutive rule.” This allows companies and LLPs to benefit from the threshold uplift as soon as possible. When determining company size for a financial year beginning on or after 6 April 2025, companies can assume that the new thresholds were applicable in the previous financial year.
✅ Conclusion
The increase in company size thresholds marks a significant step towards simplifying business reporting in the UK. By reducing the regulatory burden, these changes aim to support the growth and sustainability of small and medium-sized enterprises. Businesses should assess their eligibility under the new thresholds and adjust their reporting practices accordingly to take full advantage of the available exemptions and simplifications.
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