UK company size & audit thresholds to increase

UK Prime Minister Rishi Sunak has announced that the company size thresholds are being raised by 50%, this is in order to cut complexity and burdens from legislative reporting requirements for limited companies.

This will be particularly welcome for small companies approaching the audit threshold, which was previously £10.2m turnover and £5.1m gross assets.  These have now been increased to £15m turnover, and £7.5m gross assets, which will mean that the requirement for an audit, with associated time and costs, may be avoided for a while longer!

This legislation is planned to be laid this summer and the effect of the changes is expected to see around 5,000 large companies to be classified as medium-sized, and around 13,000 medium-sized companies falling into the small companies’ regime enabling them to benefit from potential audit exemption and filing simpler accounts. It will also mean approximately 113,000 small companies falling into the micro-entities regime to allow them to prepare simpler accounts. 

The revised measures will be as follows:

• Turnover threshold – change to not more than £1m (from £632,000 previously)
• Asset threshold – change to not more than £500,000 (from £316,000 previously)
• Employee numbers – not more than 10 (no change)

Small company:

• Turnover threshold - will increase to turnover of not more than £15m (from £10.2m previously)
• Asset threshold – will increase to not more than £7.5m (from £5.1m previously)
• Employee numbers – not more than 50 (no change)

Medium company:

• Turnover threshold - will increase to turnover of not more than £54m (from £36m previously)
• Asset threshold – will increase to not more than £27m (from £18m previously)
• Employee numbers – not more than 250 (no change)

Large company:

• Turnover threshold will increase to turnover of more than £54m (from more than £36m previously)
• Asset threshold – will increase to more than £27m (previously more than £18m)
• Employee threshold – more than 250 (no change)

There are also proposed changes to the group size thresholds (gross)

• Turnover threshold – not more than £18m (previously not more than £12.2m)
• Asset threshold – not more than £9m (previously not more than £6.1m)
• Employee numbers – not more than 50 (no change)

Medium group:

• Turnover threshold – not more than £64m (previously not more than £43.2m)
• Asset threshold – not more than £32m (previously not more than £21.6m)
• Employee numbers – not more than 250 (no change)

Large group:

• Turnover threshold – more than £64m (previously more than £43.2m)
• Asset threshold – more than £32m (previously more than £21.6m)
• Employee numbers – more than 250 (no change)

The government intends for companies to start benefiting from these changes for financial years commencing on or after 1st October 2024.[GU2] 

These changes will take approximately 132,000 businesses out of non-financial reporting requirements, and the government is also planning to remove requirements for what companies must set out in their annual reports and therefore make it easier for companies to file their reports digitally.

However, it is worth bearing in mind that there is current (separate) legislation being passed that will mean the filing of profit and loss accounts details at Companies House will take place for small companies and micro-entities.  The detail and format of the profit and loss account filings will be set out in secondary legislation, and it is not certain at the present time what the format will take that will be lodged at Companies House on the public record.  Please see the previous article here https://www.oldfieldadvisory.com/articles/2023/11/589-small-companies-required-to-file-their-pl

So whilst the company size thresholds are increasing, which is well due, there is also the new legislation requiring more P&L information to be shown on small and micro company accounts, possibly on the public record at Companies House.  The biggest win out of the company size thresholds increasing will likely be the extended timescale for exemption from audit for small companies approaching the £10m turnover mark, and its associated time and costs.

Get in touch
If you have any queries or concerns about these changes, then you should speak to your advisers who can help you navigate the changes and help you to ensure you are compliant with them. For more information on how we could help you and your business, please contact us at info@oldfieldadvisory.com or call 02476673160.

Please note: This article is provided for information only and was correct as at time of writing (18/04/24). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.