As of 6 April 2025, the UK government has introduced new, higher financial thresholds for company size classifications. These changes affect how businesses are defined as micro, small, medium or large – and could impact audit requirements, reporting duties and eligibility for certain exemptions.
At CRM Accountants, we’re already helping businesses adjust to the new rules. In this article, we explain what’s changed, what it means for your company, and how to respond.
What Has Changed
The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 came into force on 6 April 2025, bringing with them significant increases to the size thresholds used to categorise companies in the UK.
This means that many companies which were previously classified as small or medium may now fall into a lower category – which can reduce their reporting obligations and remove the requirement for a statutory audit in some cases.
The New Thresholds at a Glance
| Company Size | Turnover (Old → New) | Gross Assets (Old → New) | Employees |
| Micro | £632k → £1m | £316k → £500k | 10 |
| Small | £10.2m → £15m | £5.1m → £7.5m | 50 |
| Medium | £36m → £54m | £18m → £27m | 250 |
To qualify, a company must meet at least two out of these three criteria for two consecutive financial years. This “two-year rule” still applies under the updated regulations.
Why This Matters for Your Business
The threshold increases are substantial – and many businesses will benefit as a result. The government estimates that:
- Over 113,000 small companies will now be classified as micro-sized
- Around 14,000 medium-sized companies will now be classed as small
This change can offer a number of practical benefits:
- Audit exemptions may now apply to businesses newly classed as small
- Simplified accounts and reduced disclosures
- Lower administrative and compliance costs
What You Should Do Now
If your accounting period started on or after 6 April 2025, you can now apply the new thresholds when determining your company size. Here are some key actions to consider:
- Reassess your company size using the new limits – you may now fall into a different category than you did before
- Check audit requirements – you may no longer need a statutory audit if your company is now classed as small
Frequently Asked Questions
Can a company extend its year end to 30 April 2025 so that the next year falls under the new audit thresholds?
Yes, this is allowed – as long as the company hasn’t already changed its accounting reference date in the last five years. Extending the year end to 30 April 2025 would mean the following year (ending 30 April 2026) falls fully under the new company size thresholds for audit purposes.
Can a company with a 31 March year end use the 7-day rule to benefit from the new thresholds sooner?
Yes. The 7-day rule allows a company to prepare accounts up to 7 days before or after its usual accounting reference date. This flexibility can be used to bring the accounting period into line with the new rules. There’s no restriction on how often the 7-day rule can be applied.
What happens if a company breaches the old medium-sized limits in 2025 but qualifies as small under the new thresholds in 2026?
In this case, the company would still need an audit for the year ended 31 December 2025. However, thanks to the new thresholds, it may be classed as small for both 2025 and 2026 once the rules are applied retrospectively. If so, the company would not need an audit for the year ended 31 December 2026.
Other Regulatory Updates
Changes to Directors’ Reports
Updates to reporting requirements mean some disclosures – such as employment of disabled persons and certain financial instruments – have been removed for eligible companies, reducing redundancy in the directors’ report.
Streamlined Energy and Carbon Reporting (SECR)
Despite the new thresholds, SECR rules remain based on the old large company limits. That means some businesses that are now classed as medium may still need to comply with SECR due to breaching two of the old thresholds.
Charities
These changes do not yet affect charities, although calls for a review of the audit exemption thresholds in this sector are ongoing – particularly in Scotland.
Are You Affected?
Not all companies are eligible to benefit from the small company regime. Ineligible entities – such as public companies, insurance firms, and investment groups – must continue to follow existing rules regardless of their size.
How CRM Accountants Can Help
Understanding the new company size thresholds – and how they apply to your business – can help you avoid unnecessary audits, reduce compliance burdens and take full advantage of any exemptions available.
At Chapman, Robinson & Moore Accountants, we work with businesses to provide clear, proactive advice on all aspects of financial reporting and compliance. Whether you’re reviewing your audit requirements, planning ahead for your next year-end, or simply want to understand how the new rules affect you, our friendly and experienced team is here to help.
Get in touch today to arrange a free, no-obligation consultation. Let us help you stay compliant, reduce costs and plan with confidence.
