Thresholds defining company size in relation to non-financial reporting may be changing from 1st October 2024. Our Audit Director Barbara Sims outlines the impact these changes could have on businesses.
In March 2024, the government announced a package of measures aimed at easing the regulatory burden for companies in the UK. The associated legislation is due to be laid before Parliament this summer and, if approved, will apply for financial years starting on or after 1st October 2024.
One of the most significant changes proposed is a 50% increase to the monetary thresholds that companies must consider when determining their company size and statutory audit obligations.
What is the current audit threshold for UK companies?
The current audit threshold depends on the size of your company:
| Micro | Small | Medium | Large | |
| Annual turnover | Less than £632k | Less than £10.2m | Less than £36m | More than £36m |
| Gross assets | Less than £316k | Less than £5.1m | Less than £18m | More than £18m |
| Employee numbers | Less than 10 | Less than 50 | Less than 250 | 251 or more |
At present, Companies Act 2006 legislation requires companies to meet two out of three size thresholds to determine their reporting obligations.
What is the new audit threshold for UK companies?
If the proposed package of measures is approved by Parliament, audit thresholds will increase to the following:
| Micro | Small | Medium | Large | |
| Annual turnover | Less than £1m | Less than £15m | Less than £54m | More than £54m |
| Gross assets | Less than £500k | Less than £7.5m | Less than £27m | More than £27m |
| Employee numbers | Less than 10 | Less than 50 | Less than 250 | 251 or more |
The new thresholds would come into force for financial years starting on or after 1st October 2024.
How will the company size threshold changes affect businesses?
The proposed changes to company size thresholds will result in some companies moving down a size and ultimately reducing their reporting requirements.
Recent articles published by the UK professional accountancy bodies ICAEW and ACCA predict that these changes would reduce the administrative burden for over 130,000 businesses.
Other key changes on the horizon
Other proposed changes that are expected to impact businesses include:
- Changes to filing requirements for small and micro-entities – Companies House are making changes to filing requirements for small and micro-entities including
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- Introducing the requirement to file their profit and loss account. Although it is not yet clear whether this information will be made available to the public.
- Accounts to be filed digitally and fully tagged using iXBRL, phased in over the next 2 to 3 years.
- Removal of paper filing option for most companies.
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The details of the above, including timescales, will be set out in secondary government legislation currently in development.
- Major revisions to UK Accounting Standards – These revisions will include changes to FRS 105 and FRS 102, which come into effect for financial periods commencing on or after 1st January 2026.
Personalised advice and support from audit experts
If you own or lead a business, it is vital to consider whether these potential changes will affect you moving forwards. Our expert audit team can explain the new legislation in more detail and look at the specific impact it could have on your business. Contact us today to speak with one of our team and discuss your options.
