What are the changes to UK company size thresholds?
03 March 2026 | posted in Audit & Assurance
New thresholds for company sizes are now in effect for companies and LLPs. The changes to UK company size thresholds are effective for accounting periods starting on or after 5 April 2025
The table below sets out the new size thresholds that will be met for a financial year if any two of the three criteria are met:
| New threshold | Previous threshold | ||
| Micro | Turnover not more than:
Total Assets: No. of employees (not more than):
|
£1m
£500k 10 |
£632k
316k 10 |
| Small | Revenue:
Total Assets: No. of employees (not more than):
|
£15m
£7.5m 50 |
£10.2m
£5.1m 50 |
| Medium | Revenue:
Total Assets: No. of employees (not more than):
|
£54m
£27m 250 |
£36m
£18m 250 |
What do the changes to company size thresholds mean for companies and LLPs?
The company size bands determine your businesses mandatory financial reporting, statutory audit requirements and tax compliance obligations. Smaller companies benefit from simpler, reduced reporting requirements and are exempt from audit. Larger companies have to comply with more rigorous regulations.
Moving from one size band to another band can therefore have significant implications for business owners.
Moving from medium to small
The biggest impact of the changes is for companies moving from medium to small. Small companies are generally exempt from a statutory audit unless they are part of a group. Government analysis suggests that around 14,000 companies and LLPs may now be exempt from audit because they fall under the small company threshold.
Businesses who now find themselves below the medium company threshold can apply for exemption from statutory audit provided they meet all other criteria (e.g. not part of a group, not involved in an industry that must have an audit regardless of size such as banking or insurance etc.)
Moving from small to micro
Small companies that become micro companies can use the very simplified micro-entity accounting regime which includes highly condensed financial statements, and no longer need to produce a Directors’ Report.
Transition and the two-year rule
Usually, a company must meet the size threshold for two consecutive years to change category. However, the new legislation introduces a transitional adjustment, and may assume that the new thresholds applied in the previous year.
Important: the transition rules do not allow companies to skip an audit for the 2025 financial year. Companies must have an audit for any year that began before 6 April 2025 if one was legally required at the time.
For example:
- Company X was ‘medium’ under the old thresholds for the 2025 financial year.
- Under the new thresholds it becomes a small company in the 2026 financial year.
- Using the transitional rules, it can treat the 2025 financial year as small as if the new thresholds applied, and can claim small company exemptions immediately for the 2026 financial year.
- Company X is still required to have an audit for the 2025 financial year but does not need an audit for the 2026 financial year.
How Moore can help
For further advice on how the changes apply to your business, please contact us.
- Peterborough accountants: Tel 01733 397300
- Corby accountants: Tel 01536 461900
- Northampton accountants: Tel 01604 654254