Changes to company size thresholds

Changes to company size thresholds coming into place have been driven by an attempt to cut complexity and reduce the reporting burden on companies.

The new Companies (Accounts and Reports) Regulations 2024 (SI 2024/1303) has also taken into account the impact of inflation since the last threshold change in 2013!

Existing thresholds

The current micro, small and medium-sized company limits are as follows:

For each size limit, the company must fall below two out of the three thresholds to qualify. The ‘two-year rule’ means that a company must fall into a new category for two consecutive years in order to qualify.

Changes to thresholds

The threshold changes apply to financial years beginning on or after 6 April 2025. The date that the financial statements are approved by the board or the date that any audit or accountant’s report is signed is not relevant!

As a result of the increases, it is anticipated that 113,000 small companies will become micro-sized and 14,000 medium-sized companies will become small.

Audit exemption thresholds increase in line with the new limits.

Other points to consider.

• The date the accounting period commences is the date that determines when the new thresholds can be applied.
• A company may be able to extend its year end to 30 April 2025 so that the year end 30 April 2026 would fall under the new company limit rules, provided the accounting reference date has not been extended in the previous five years.
• For an accounting period commencing on or after 6 April 2025, the new thresholds are treated as having always been the thresholds that applied.

Other considerations

The regulations also make some amendments to director report requirements with the aim of removing requirements which are duplicated, superseded or provide low value disclosures.

If you are unsure with regards to any of the above, please contact your account manager here at Kennedys Accounting and they will be pleased to discuss this with you.