Update on changes to the company size thresholds and the audit threshold
The UK government has published The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024.
These regulations are aimed at reducing burdens on small and medium-sized companies. They adjust the monetary size thresholds for micro, small and medium-sized companies and groups. They also confirm that the audit threshold will continue to be coupled with the small company threshold.
Changes to size thresholds and reporting requirements
The regulations, which will apply to financial years beginning on or after 6 April 2025, will:
- Lift the monetary thresholds that determine a company’s size and the audit threshold by around 50%. The increase in the threshold for qualification as a small group also increases the threshold at which group accounts must be prepared.
- Remove several low-value, obsolete or overlapping requirements from the directors’ report.
The increases in the company size thresholds and the audit threshold will also apply to Limited Liability Partnerships (LLPs).
Additional measures to remove certain overlapping EU-origin reporting requirements from the Directors’ Remuneration Report, as well as to address technical issues in the audit regulatory framework, will be detailed in a separate piece of secondary legislation, planned for early next year.
In total, these changes are estimated by the government to deliver a deregulatory saving of over £240 million per year.
The UK’s Modern industrial strategy
In October 2024, several corporate reform announcements, including those set out above, were covered by a written ministerial statement to Parliament by Jonathan Reynolds, Secretary of State for Business and Trade, on the UK’s Modern industrial strategy.
Further updates on the Future of corporate reporting
The Department for Business and Trade (DBT) will also undertake a further consultation on the Future of corporate reporting, an initiative started by the previous government. This consultation will be launched in 2025, with the ambition of simplifying and modernising non-financial reporting so that it better meets business and investor needs.
To complement the ministerial statement, the UK government published research on the Value of non-financial reporting to investors, highlighting the potential value increases from improved non-financial reporting.
Also in October 2024, the UK government published its response to the consultation Non-financial reporting: simpler corporate reporting, conducted earlier in the year, which proposed:
- An uplift in the medium-sized company employee threshold from up to 250 employees to up to 500.
- An exemption for medium-sized companies from the requirement to produce a strategic report.
The proposals were made by the previous government, and a decision has been taken not to take these measures forward at this time. Any further proposals will be included as part of DBT’s broader Future of corporate reporting work.
Read the new regulations here.
