UK company size thresholds are set to change from April 6, 2025, rising by around 50 per cent.
This most likely means that your company could be changing from a medium-sized to small or a small to microbusiness. The government hopes that the changes will result in 113,000 small businesses and LLPs becoming microbusinesses; 14,000 shifting from medium-sized business to small and 6,000 moving from large to medium-sized.
All of that said, be aware that the changing metrics will be annual turnover and balance sheet. The number of employees threshold will remain the same. Two of the three criteria must apply for you to be seen as that size of business for a financial year.
Company size threshold before April 6, 2025
| Annual turnover | Balance sheet total | Employees | |
|---|---|---|---|
| Micro | £632,000 | £316,000 | 10 |
| Small | £10.2 million | £5.1 million | 50 |
| Medium | £36 million | £18 million | 250 |
Company size threshold after April 6, 2025
| Annual turnover | Balance sheet total | Employees | |
|---|---|---|---|
| Micro | £1 million | £500,000 | 10 |
| Small | £15 million | £7.5 million | 50 |
| Medium | £54 million | £27 million | 250 |
The idea behind increasing the threshold is that it’ll reduce regulation and audit requirements for thousands of businesses while also cutting complexity. These new thresholds account for inflation that’s taken place since the thresholds were last changed in 2013.
There’ll be no transitional period – we’ll be diving straight in.
The biggest change will be those moving from medium-sized to small businesses. They will no longer have to do a statutory audit of their annual accounts and from producing a strategic report.
Meanwhile, those moving into the microbusiness category will be exempt from producing a Directors’ Report.
What about the changes to the Directors’ Report?
This move also reduces the requirements for the Directors’ Report, especially for overlapping or outdated data.
Large and medium-sized businesses will no longer have to declare:
- Financial instruments
- Important events since the end of the financial year
- Research and development (R&D)
- The employment of disabled people
- Branches outside the UK
- What developments are likely in the future
- Engagement with employees
- Engagement with customers and suppliers
What about off-payroll/IR35?
Small companies IR35 exemption rules still apply as they did before – it’s still up to the worker to identify if they’re off-payroll.
What do I need to do now?
Determine what your new reporting requirements will (and won’t) be. If you have an accountant, make sure you’ve covered everything you need to know with them. If not, the government website has more information.
Tom Haylock is a data specialist, business expert, and CEO of Sharecat Data Services: “If you switch to a simpler reporting method, you might run into issues getting loans or favourable credit terms. Some lenders don’t like vague numbers.
“Taxes, grants, and government support programmes could also be affected,” he added. That’s not something you want to figure out after the fact.” Though for small businesses, that can be a good thing as grants are more widely available and often have larger pots for smaller businesses.
Haylock acknowledges that this shift doesn’t just affect small businesses, it has an impact on accountants and financial service providers too. “If fewer companies need audits, firms that rely on that work will need to adjust. Some might pivot to financial advisory services or other value-added options. Those that don’t could see a dip in business,” he said.
“The best approach is to be proactive,” he said. “Look at where your company stands and how these changes might impact you. If there’s an opportunity to benefit, take it.”
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