What are the changes to UK company size thresholds?

The UK government has increased the thresholds for small and medium size companies from April 2025. These changes will reduce the amount of reporting required in sets of accounts as well as increasing the level at which companies need an audit of their financial statements.

What are the new thresholds?

A two year rule applies when working out the size of a company or group of companies.

This means that a company only ceases to be small (or medium) once it has breached at least two of the above limits, for two consecutive reporting periods.  There are transitional provisions included in the new legislation that will allow for the new limits to be applied for the comparative period to ensure that the ‘two-year rule’ still applies in substance.

A group of companies can use the above thresholds to determine size when the results of the group are aggregated.

What will the impact be?

The government estimates that the new regulations will result in around 113,000 companies moving from the small to micro entity category and 14,000 businesses becoming small instead of medium.  It estimates that around 6,000 companies will be moved from large to medium sized.

Companies able to move down a size category will be entitled to the accompanying reduction in reporting and audit requirements.

Entities moving from medium size to the small company regime will no longer be required to have their accounts audited or produce a strategic report.  They will also be able to take advantage of simpler accounting requirements. Those moving to the micro entities’ regime will be exempt from producing a directors’ report.

What do you need to do?

To prepare for these changes businesses need to:

• Determine whether the revised thresholds will change the size classification
• Inform stakeholders of changes and plans
• Ensure communication with accountants and auditors for a smooth transition

If you have any questions regarding the reclassification, please get in touch with your Swindells partner who will be able to advise you further.