April 3, 2025 Changes to company size thresholds
Micro, Small, Medium, or Large Company? The size of a business represents far more than some arbitrary way to make business statistics look more interesting. In fact, depending on its size, a company will have to meet differing audit and reporting requirements. And the same goes for LLPs.
For example, micro entities don’t have to produce a director’s report, whilst most micro and small entities don’t have to have a statutory audit of their annual accounts. There are exceptions to this exemption depending on the nature of the business and whether the company sits within a larger group. Medium size companies do have to have an audit but they are exempt from some of the strategic reporting requirements that larger companies have to adopt; such as the requirement to report on how directors meet their Companies Act 2006 obligations to take account of stakeholder and other interests.
The thresholds for defining the size of a company were last set in 2013. Now thanks to “The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024” thresholds are set to rise again for reporting periods starting on or after 6 April 2025. The new thresholds are set out below and apply to companies which meet two or more of the three criteria:
- Micro: Turnover not more than £1m, Balance sheet total not more than £500k, Monthly average number of employees not more than 10.
- Small: Turnover not more than £15m, Balance sheet total not more than £7.5m, Monthly average number of employees not more than 50.
- Medium: Turnover not more than £54m, Balance sheet total not more than £27m, Monthly average number of employees not more than 250.
When it comes to groups, in order to account for inter-company set-offs and group transactions the same net criteria above apply. Groups also have to take account of new gross thresholds. For small businesses these are turnover of less than £18m, balance sheet of less than £9m and less than fifty employees. For medium businesses these go up to £64m turnover, £32m balance sheet, and less than 250 employees.
Commenting on the changes Jenny Carter, the FRC’s Director of Accounting and Reporting Policy, said the new threshold changes: “are designed to reduce and simplify the reporting burden for thousands of small and medium sized businesses, which are the backbone of the UK economy.” It is estimated that the measure will result in 133,000 companies moving to a lower category.
Elemental is able to assist companies in deciding how they might be impacted by the new reporting thresholds, including identifying those companies which may still need to comply with additional reporting requirements.
