Changes to company size thresholds and audit requirements effective this year
- Dan Burnell
- Apr 1
- 2 min read
Updated: 3 days ago
From April 2025, significant changes to company size thresholds and audit requirements are coming into effect. Here’s what you need to know to ensure your business remains compliant.
Key changes
On 18th March 2024, the UK government announced a series of deregulatory measures aimed at simplifying financial reporting for businesses by raising the company size thresholds. These changes are designed to reduce the complexity and burden of legislative reporting requirements, making compliance easier for many companies.
New size thresholds
The size thresholds that determine the classification of companies have been increased by 50%. The new thresholds are as follows:
Micro-entities: Annual turnover not more than £1 million, balance sheet total not more than £500,000, and not more than 10 employees.
Small companies: Annual turnover not more than £15 million, balance sheet total not more than £7.5 million, and not more than 50 employees.
Medium companies: Annual turnover not more than £54 million, balance sheet total not more than £27 million, and not more than 250 employees.
Two out of the three thresholds must be breached for two consecutive reporting periods to determine the company’s size.
Impact on audit requirements
With the new thresholds, it is estimated that approximately13,000 companies previously classified as medium-sized will now fall into the small company regime. These companies can benefit from audit exemptions and prepare simpler accounts using FRS 102 1A for smaller entities. Additionally, around 113,000 companies will now be classified as micro-entities and can prepare even simpler accounts under FRS 105.
Should you claim audit exemption?
While claiming audit exemption can reduce compliance fees, it’s important to consider the benefits of an audit. An audit provides credibility to your financial statements, which can be valuable to stakeholders such as lenders, suppliers, and customers. It also helps identify weaknesses in internal controls and reduces the risk of misreporting or fraud.
Conclusion
These changes are designed to make compliance easier and reduce the administrative burden on businesses. However, it’s crucial to weigh the benefits of audit exemptions against the potential advantages of having audited financial statements. If you have any questions or need assistance navigating these changes, please contact us at BlueFox Accounting. We’re here to help!