UK company size thresholds are set to change from April 6, 2025, the first change since 2013.

This most likely means that your company could be changing from a medium-sized to small or a small to microbusiness. The government hopes that the changes will result in 14,000 shifting from medium-sized business to small and 6,000 moving from large to medium-sized.

The biggest change will be those moving from medium-sized to small businesses. They will no longer have to do a statutory audit of their annual accounts and won’t need to produce a strategic report.

All of that said, be aware that the changing metrics will be annual turnover and balance sheet. The number of employees threshold will remain unchanged. Two of the three criteria must apply for you to be classed as that size of business for the financial year.   

Company size threshold before April 6, 2025

	Annual turnover	Balance sheet total	Employees
Micro	£632,000	£316,000	10
Small	£10.2 million	£5.1 million	50
Medium	£36 million	£18 million	250

Company size threshold after April 6, 2025

	Annual turnover	Balance sheet total	Employees
Micro	£1 million	£500,000	10
Small	£15 million	£7.5 million	50
Medium	£54 million	£27 million	250

The idea behind increasing the threshold is that it’ll reduce regulation and audit requirements for thousands of businesses while also cutting complexity. These new thresholds account for inflation that’s taken place since the thresholds were last updated.

There’ll be no transitional period – once April 6, 2025 hits, that’ll be it.

What about the changes to the Directors’ Report?

This move also reduces the requirements for the Directors’ Report, especially for overlapping or outdated data.

Large and medium-sized businesses will no longer have to declare:

• Financial instruments
• Important events since the end of the financial year
• Research and development (R&D)
• The employment of disabled people
• Branches outside the UK
• What developments are likely in the future
• Engagement with employees
• Engagement with customers and suppliers

What about off-payroll/IR35?

Small companies IR35 exemption rules still apply as they did before – it’s still up to the worker to identify if they’re off-payroll.

What do I need to do now?

Determine what your new reporting requirements will (and won’t) be using the data above. Talk it over with your accountant if you haven’t already.

Tom Haylock is a data specialist, business expert, and CEO of Sharecat Data Services: “There’s a trade-off,” he told Growth Business. “Banks and investors often prefer detailed financial statements. If you switch to a simpler reporting method, you might run into issues getting loans or favourable credit terms. Some lenders don’t like vague numbers.

“Taxes, grants, and government support programmes could also be affected. That’s not something you want to figure out after the fact.”

This shift doesn’t just affect small businesses. It affects accountants and financial service providers too, as Haylock acknowledges. “If fewer companies need audits, firms that rely on that work will need to adjust. Some might pivot to financial advisory services or other value-added options. Those that don’t could see a dip in business.

“The best approach is to be proactive. Look at where your company stands and how these changes might impact you. If there’s an opportunity to benefit, take it. If there’s a risk, prepare for it. Waiting around isn’t a strategy.”

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