Revised Company Size Thresholds Take Effect from April 2025

The UK government has enacted a significant reform to company reporting rules by increasing the financial thresholds that define a company’s size for accounting and filing purposes. From 6 April 2025, businesses will see the turnover and balance sheet limits rise by approximately 50%, allowing thousands more companies to qualify for simplified reporting obligations under the Companies Act 2006.

This reform is part of a broader post-Brexit effort to streamline UK corporate regulation, encourage entrepreneurship, and reduce administrative overhead for small and medium-sized enterprises (SMEs). As inflation and nominal business growth have pushed many companies into more onerous reporting categories, these changes bring the size thresholds back into line with the scale and complexity of modern UK business operations.

 

What Has Changed – The New Size Criteria

 

A company’s size classification—micro, small, medium or large—affects its financial reporting, audit requirements, and Companies House filing obligations. Under the revised rules, the turnover and balance sheet thresholds that determine these classifications have been substantially increased.

To qualify for a particular category, a company must meet at least two out of three criteria: turnover, balance sheet total, and average number of employees.

 

New Thresholds Effective from 6 April 2025

Size	Turnover	Balance Sheet Total	Employees
Micro	≤ £1.2 million	≤ £0.6 million	≤ 10
Small	≤ £15 million	≤ £7.5 million	≤ 50
Medium	≤ £54 million	≤ £27 million	≤ 250
Large	Above the above thresholds

 

These increases reflect inflationary growth since the last threshold review and aim to ensure that businesses aren’t pushed into more complex compliance regimes simply due to nominal revenue growth rather than structural or operational expansion.

 

Why This Matters – Policy Objectives

 

The policy behind the threshold increase is twofold:

 

• Reduce the compliance burden on UK companies that have grown in turnover or asset base but remain relatively simple in structure.
• Free up management time and financial resources, particularly in the SME sector, to focus on growth, investment, and innovation rather than navigating disproportionate red tape.

 

By widening access to simplified reporting exemptions and audit relief, the government expects to support a more agile and competitive business environment while still preserving the integrity of corporate transparency.

 

What Does This Mean for Me? – Impacts on UK Businesses

 

1. Simpler Reporting for More Companies

 

Businesses that move down a size classification may now be entitled to:

 

• Prepare abridged or simplified accounts
• Avoid filing a detailed profit and loss account
• Claim audit exemption if other conditions are met
• Omit the strategic report and directors’ remuneration disclosures

 

This can result in direct savings on compliance costs—especially for companies just above the old thresholds—and reduce the reporting pressure on finance teams and directors.

 

2. Financial and Operational Flexibility

 

For many SMEs, accounting and auditing obligations represent a significant annual cost and operational distraction. Reclassifying as a “small” or “micro” entity allows businesses to:

 

• Improve cash flow by lowering professional fees
• Reduce paperwork when applying for grants or tax reliefs
• Focus more time on customers and internal growth

 

However, while the law reduces minimum requirements, businesses should continue to maintain robust financial records for internal management, investor relations, and borrowing purposes.

 

3. Audit Exemption Eligibility Expanded

 

Audit exemption is now available to more companies as the financial limits rise. Many companies previously just over the old small-company threshold will now qualify to opt out of a statutory audit, provided they are not part of a group, a public interest entity, or otherwise ineligible.

This change could have a major impact in sectors where company structures are simple but revenue is high—for example, digital services or small group trading companies.

 

4. Implications for Stakeholders and Finance Providers

 

While less reporting may ease the burden for directors, it can reduce the transparency available to external stakeholders. Lenders, investors, and trade partners may begin to request voluntary disclosures, especially where statutory reporting no longer provides sufficient insight into business performance.

Businesses may also find that credit scoring models and due diligence reviews rely on fuller data than what will now be legally required to file.

 

5. Systems and Process Adjustments

 

Companies should review their internal processes and accounting software to ensure they are aligned with their revised classification. Many firms will benefit from:

 

• Updating templates for directors’ reports or financial statements
• Revising audit plans or cancelling unnecessary engagements
• Clarifying new reporting status with accountants, banks, or auditors

 

This transition offers an opportunity to modernise finance operations, especially where legacy reporting was being maintained solely for compliance purposes.

 

Conclusion

 

The increase in company size thresholds effective from April 2025 is a positive, practical change for UK businesses. It reflects modern economic realities and gives more companies the opportunity to reduce red tape, streamline financial reporting, and focus on growth.

Business owners, directors, and finance professionals should take proactive steps now to determine whether their company’s classification has changed and to adjust their accounting practices accordingly. Doing so could reduce costs, improve efficiency, and create space for strategic investment—exactly what the reforms were designed to enable.