From 6th April 2025, UK companies will benefit from the first significant update to size thresholds since 2013, with increases of approximately 50% across turnover and balance sheet categories. These changes represent a substantial opportunity for accountants to deliver added value to clients through strategic advice and planning.
It is estimated that approximately 133,000 businesses will shift categories, with the majority – some 113,000 firms – moving from small to micro, 14,000 from medium to small, and 6,000 from large to medium. The changes also apply to companies under the Companies Act 2006, including limited liability partnerships and qualifying limited partnerships.
For these businesses, the reclassification brings significant advantages. Companies transitioning from medium to small will no longer require a statutory audit of their annual accounts. Many will gain eligibility for less onerous reporting frameworks including FRS 102 Section 1A (small entities) or FRS 105 (micro-entities). Small companies are exempt from producing a strategic report, and all businesses moving down a category will benefit from reduced red tape and compliance burdens that translates to lower administrative costs.
The revised thresholds
Company and group size thresholds (net) for financial years commencing on or after 6 April 2025 | ||||
2 out of 3 of: | Micro | Small | Medium | Large |
Annual turnover (£) | <1m | <15m | <54m | >54m |
Balance sheet total (£) | <500k | <7.5m | <27m | >27m |
Average number of employees | <10 | <50 | <250 | >250 |
Group size thresholds (gross) for financial years commencing on or after 6 April 2025
| ||||
2 out of 3 of: |
Not applicable | Small | Medium | Large |
Annual turnover (£) | <18m | <64m | >64m | |
Balance sheet total (£) | <9m | <32m | >32m | |
Average number of employees | <50 | <250 | >250 |
While the new thresholds will apply to financial periods starting on or after 6th April, companies can apply them to the previous year when preparing their first set of accounts under the new rules. To qualify under a new category, companies must meet the size criteria for two consecutive years, unless newly incorporated.
Streamlined reporting
Alongside the threshold changes, several reporting requirements have been removed for periods starting on or after 6 April 2025 in a bid to reduce the complexity and slash reporting requirements. For example, small companies no longer have to disclose whether they employ staff with disabilities, while medium and large companies will see an elimination of several requirements, including disclosures on financial instruments, post-balance sheet events, R&D and more. These changes aim to reduce duplication, as such information is often already covered elsewhere.
Despite these simplifications, some obligations remain. Notably, Streamlined Energy and Carbon Reporting (SECR) disclosures will still apply to companies classified as large under the current thresholds. This means businesses moving from large to medium may still need to include these disclosures.
Potential challenges
Accountancy practices should be aware that there are changes to some reporting standards. To support these changes, the UK Financial Reporting Council (FRC) has issued updates to several standards and publications, to help stakeholders understand and meet reporting responsibilities:
A summary document outlining the changes to company size thresholds, along with key considerations for stakeholders
Amendments to Financial Reporting Standard (FRS) 102 and FRS 105, applicable to companies in the UK and the Republic of Ireland, along with an updated FRS 102 factsheet addressing climate-related matters
An updated overview of the financial reporting framework. This aims to assist particularly smaller entities by providing an overview of the simpler financial reporting regimes that may be available to them
Updated and streamlined scoping tables that set out Companies Act 2006 disclosure requirements for the strategic report, the directors’ report, and the energy and carbon report. This publication supersedes Appendices II, III, IV(a), and IV(b) in the 2022 Guidance on the Strategic Report.
How to add value
This regulatory change presents several opportunities for accountants to provide enhanced services. Practitioners can help clients with strategic planning to understand which category they fall into and how to act accordingly. Offering timely advice is crucial, particularly for clients with unusual year-ends who will need more bespoke guidance. Compliance support will be valuable as clients navigate the transition between reporting frameworks.
The increase in company size thresholds represents an opportunity for businesses to reduce their regulatory burden – and for accountants to demonstrate their strategic value. Accountants can also provide cost-benefit analysis of the full financial impact of changing status, including administrative savings. By proactively guiding clients through these changes, accountancy practices can strengthen client relationships while helping businesses benefit from simplified reporting requirements and potential cost savings.
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