UK company size thresholds to increase by 50%

1. The new thresholds for companies and LLPs

For nine months, we have been expecting an increase in company and LLP size thresholds. Now we have the legislation: https://www.legislation.gov.uk/uksi/2024/1303/made

For financial years beginning on or after 6 April 2025, thresholds increase as follows:

This is roughly a 50% increase in revenue and total asset figures. The employee thresholds have not changed.

2. How the thresholds work

In a company’s first year, if its figures are under or equal to two of the three small company thresholds, it can prepare small company accounts. The same rule works for the micro and medium thresholds.

After that, if its figures are under or over two of the three thresholds for two consecutive years, it gains or loses the right to prepare accounts of that size.

Here is a worked example, of the current position, for an entity with a 31 December year-end:

For financial years beginning on or after 6 April 2025, you proceed as if the new thresholds had always been in place.

Throughout this article:

• ‘Revenue’ is an entity’s turnover in its annual accounts
• ‘Total assets’ is the total of its assets in its annual accounts (fixed assets + current assets)
• ‘Employees’ is the number of employees under contract each month that year, averaged across the months.

Groups can choose to measure either their statutory revenue and total assets (after intercompany eliminations) against the figures above, or their gross revenue and assets (before intercompany eliminations) against the figures below, and use whichever gives the more favourable answer. It is okay to  mix and match.

3. Financial years and accounting reference dates

The new rules apply to financial years beginning on or after 6 April 2025.

Your ‘financial year-end’ is a date of your choice within seven days of your ‘accounting reference date’.

Your accounting reference date is typically the last day of a month, e.g. 31 March 2025. On Companies House, this is the “next accounts made up to…” date.

If you typically end your financial year on a Sunday, ending it on 6 April 2025 rather than 30 March 2025 would mean the 2025-26 period uses the new (higher) thresholds.

4. Why size matters

Company size has several impacts, some of which are expensive.

• Micro entities can apply FRS 105, simplified accounting rules which do not bring leases onto the balance sheet
• Micro and small accounts contain fewer disclosures than medium and large accounts
• Micro and small entities can currently file filleted accounts at Companies House, giving away less information to rivals
• Small entities in small groups do not need an audit (though this may still be required by banks, shareholders, or articles)
• Parents of small groups do not need to prepare consolidated accounts
• Medium entities do not need to present a section 172 statement

There are some extra details to these points. If in doubt, ask your accountant.

5. Changes to front-end disclosures

Several requirements for the directors’ report will be removed from 6 April 2025.

Once these requirements have been deleted from the statutory instruments, they will no longer apply to any set of accounts, whatever their year-end.

Small company directors’ reports will no longer need to discuss:

• their policy on employing and training disabled people if they have > 250 employees

Medium/large company directors’ reports will no longer need to discuss:

• their policy on employing and training disabled people if they have > 250 employees
• engagement with employees, suppliers, customers and others if they have > 250 employees
• financial risk management objectives and policies (including hedging)
• price, credit, liquidity and cash flow risk… though these may still appear in financial instrument disclosure notes
• post year-end events or likely future developments
• branches outside the UK

LLP members’ reports indirectly follow the same rules, so they also benefit from all the exemptions above.

6. What is NOT changing?

The new statutory instrument that changes company size thresholds says nothing about the specific paragraphs linked in the following:

• Streamlined Energy and Carbon Reporting (SECR) disclosures follow the size limits in SI 2008/410 7.7A
• The new ‘failure to prevent fraud offence’ that takes effect from 1 September 2025 follows the size limits in ECCTA part 5 section 201

The thresholds for SECR and ‘failure to prevent fraud’ are not impacted by the changes in company size thresholds. It would take a new, different instrument to amend them. Until then these will still be based on £36m turnover and £18m total assets.

Watch out in particular for the ‘failure to prevent fraud offence’. A lot of the guidance says this applies to ‘large organisations’, which still retains its original meaning of exceeding (2 out of 3 of) £36m turnover, £18m total assets, and 250 employees.

7. What else should be on your radar?

This article deals with the change to company size thresholds, but there are several more changes announced for  the next few years.

These include:

• FRS 102 changes to revenue, leases, small company disclosures and more for periods starting on or after 1 January 2026
• ‘Failure to prevent fraud’ offence for large organisations from 1 September 2025
• ID verification for directors and persons of significant control on Companies House (from Autumn 2025)
• Consultation on the Future of Corporate Reporting, to focus on simplifying and modernising non-financial reporting (starting 2025)

And further ahead (dates TBC):

• Small companies having to file their full accounts, including the directors’ report and P&L
• Restrictions on shortening accounting periods
• Mandating the filing of annual accounts through third-party software, eg accounts prep or iXBRL tagging software

Please get in touch if you have any questions about the above.

8. In summary

Size thresholds for companies and LLPs will increase around 50% for financial years beginning on or after 6 April 2025.

https://www.legislation.gov.uk/uksi/2024/1303/made