Effective from 6 April 2025, the company size thresholds are changing. Therefore, any accounting periods starting on or after 6 April 2025 will be impacted by the changes. Below is a table that summarises the changes to the thresholds for micro, small, and medium companies for individual companies and groups (net balances) including LLPs. 

Generally, a company qualifies as the allocated size that it is in its first financial year based on the conditions it meets in the table above. In the following years, a company must meet the conditions in that year and the year before. However, if the company no longer meets the criteria in the following year, they may continue to claim the relevant company size exemptions if that company reverts back to the previous sized company the following year. 

For example, if a company is medium sized in year one, large sized in year two, and medium sized in year three, they can continue to take the medium sized exemptions in year two. 

As with most auditing changes, there is a transitional period which means the above new thresholds can be applied retrospectively. So, for any previous year, accounts can make up the two consecutive year requirement based on the revised thresholds. 

What impact will these changes have? 

Companies able to move down a size category will be entitled to the accompanying reduction in reporting and audit requirements. Please see below a summary of the changes when moving between each company size category. 

Moving from small to micro 

Micro entities are a sub-classification of small companies. Micro-entities can prepare and file a balance sheet with less detail than what’s included in a normal set of small company accounts. Companies moving from small to micro benefit from an exemption from producing a directors’ report. Also, no profit and loss is required to be filed to Companies House. If your company was previously a small entity and required an audit, it may still require an audit as a micro-entity. Please see Companies House for further guidance on which micro-entities may still require an audit. 

Moving from medium to small 

Small companies can choose to disclose less information in their accounts compared to medium companies, and therefore the directors may choose to take these disclosure exemptions. The key changes are: 

• Reduced disclosure requirements in the directors’ report. 
• No cashflow statement is required. 
• No requirement to deliver a copy of the directors’ report or profit and loss to Companies House. 

Small companies can also be exempt from audit and therefore if moving from medium to small, there may no longer be a requirement to be audited. Please see Companies House for further guidance on what small entities may still require an audit. 

A small company can choose to file abridged or filleted accounts at Companies House to reduce some of the sensitive information available to the public. However, filing requirements for small companies has been passed into law, meaning that at a point in time small companies will no longer have the option to file abridged or filleted accounts. An effective date has not yet been set for this, and therefore until this is set, abridged and filleted accounts can still be filed. 

Moving from large to medium 

The key changes for companies moving from large to medium is that they will be able to take advantage of exemptions from certain Strategic Report requirements, including Section 172(1) statement which includes duty to promote the success of the company. 

A medium-sized company can prepare accounts according to special provisions applicable to medium-sized companies. It can also choose to submit reduced information to Companies House.  

However, the following rules still apply for companies that cannot prepare and submit medium-sized company accounts if it is, or was at any time during the financial year: 

• A public company. 
• A company that has permission under Part 4 of the Financial Services and Markets Act 2000. to carry on a regulated activity or that carries on an insurance market activity. 
• A member of an ineligible group (more information can be found on Companies House). 

Next steps 

If your company or group’s thresholds results in a change in entity size and you are still unsure what the impact of this will be on the company, we recommend reaching out to a professional accountant to advise you.  

We are happy to provide advice to those who want to know a bit more, so please reach out to us at hello@geraldedelman.com, and we will have a professional adviser get back to you.