Spotlight on the Companies Act size threshold and non-financial reporting changes

Changes to the company law size thresholds and other reporting changes are effective from 6 April 2025. Find out more about how these will impact on company reporting.

The UK government confirmed changes to the company law size thresholds and other reporting changes in The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024.

The size threshold changes in the 2024 Regulations, along with the related financial reporting concessions, apply to financial years beginning on or after 6 April 2025 and are relevant to companies, limited liabilities partnerships (LLPs) and qualifying limited partnerships.

The removal of certain directors’ report requirements applies to companies only.

Details of the size threshold changes and the background to this package of reforms are set out in an earlier ICAS update.

Assessing entity size under the 2024 Regulations

‘Smoothing provisions' mean that an entity only changes size classification if it meets the size thresholds for two consecutive years. In the first year the changes are effective, the new thresholds are applied retrospectively for those calculations, which means a company could change size classification in the first year it applies the new thresholds.

Concessions for entities qualifying as small, including micro-entities

Entities qualifying as small or micro-entities for the first time will have simpler disclosure requirements, including the ability to apply Section 1A of FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland, in the case of small entities, or FRS 105, The Financial Reporting Standard applicable to the micro-entities regime, in the case of micro-entities.

Entities falling within the small companies regime, which includes micro-entities, are entitled to audit exemption and aren’t required to prepare consolidated group accounts, if they are a parent.

The 2024 Regulations also remove the directors’ report requirement for companies to disclose policies on recruiting and supporting disabled staff.

Directors’ report changes for large and medium-sized companies

For large and medium-sized companies, the 2024 Regulations no longer require directors’ reports to include:

• Policies on recruiting and supporting disabled staff and on engagement with employees, suppliers, customers and others; and
• information about financial instrument risks, research and development spending, and post-balance sheet events.

These changes aim to reduce duplication, as similar information is often covered elsewhere in reports, like the business review within the strategic report.

Streamlined Energy and Carbon Reporting (companies and LLPs only)

Streamlined Energy and Carbon Reporting (SECR) disclosures will still apply to companies and LLPs classified as large under the old thresholds i.e. size thresholds applying to financial years beginning on or before 5 April 2025. This means that some companies and LLPs moving down to a lower size classification under the new thresholds may still need to make these disclosures.

FRC resources

In response to the 2024 Regulations, the FRC has published a summary document outlining the changes to the reporting thresholds, along with key considerations for stakeholders, and updates to existing relevant material as follows:

• Amendments to FRS 102 and FRS 105, along with an accompanying impact assessment.
• An updated Overview of the financial reporting framework. A key purpose of this document is to assist 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 Guidance on the strategic report (2022).
• An updated version of FRS 102 Factsheet 8 on climate-related matters.