New Company Size Thresholds Could Cut Your Admin

If you’re running a small or medium business, April 2025 brought some genuinely good news that people are still overlooking. 

New regulations are increasing company size thresholds by around 50%, which could mean significant savings on audit costs and reduced reporting requirements for thousands of companies.

The changes affect how businesses are classified for accounting and audit purposes. Many companies that currently need expensive statutory audits may find they no longer qualify as “medium” or “large” – dropping them into simpler reporting categories with fewer compliance requirements.

Read on to learn more about the company threshold changes and how they affect over 100,000 businesses. 

How The Company Thresholds Are Changing

The government has increased the monetary thresholds that determine whether your company is classified as micro, small, medium, or large. 

These thresholds haven’t changed since 2013, so the increases account for inflation and business growth over the past decade.

• Micro-entity thresholds increase from £632,000 to £1 million for turnover, and from £316,000 to £750,000 for balance sheet total. The employee limit stays at 10.
• Small company thresholds jump from £10.2 million to £15 million for turnover, and from £5.1 million to £7.5 million for balance sheet total. The employee limit remains at 50.
• Medium-sized company thresholds rise from £36 million to £54 million for turnover, and from £18 million to £27 million for balance sheet total. The employee limit stays at 250.

Normally, a company must meet at least two of the three criteria for two consecutive financial years to change size category. However, transitional rules mean companies can already apply the new thresholds for financial years starting on or after 6 April 2025, without waiting two years.

How The Threshold Changes Impact Businesses

These threshold changes will affect a substantial number of businesses. Government estimates suggest around 113,000 companies will move from the small company category down to micro-entity status. Another 14,000 companies will drop from medium-sized to small company classification.

Moving from small to micro-entity status could save thousands in audit fees alone, while companies dropping from medium to small size will benefit from simplified reporting requirements and potential audit exemption.

Why You Might Want to Keep Your Audit Anyway

Even if you become eligible for audit exemption, there are compelling reasons why continuing with voluntary audits might be the smart choice for your business.

• Lenders often require audited accounts when you’re applying for significant financing. Banks and other financial institutions tend to trust audited figures more than unaudited accounts, as this can make the difference between getting approved for a loan or being rejected.
• Audits improve your internal controls and can identify weaknesses in your systems before they become serious problems. Auditors don’t just check your numbers – they review your processes and highlight areas where you could reduce risk or improve efficiency.
• Credibility with suppliers and customers often depends on having independently verified accounts. Larger clients may require audited accounts before entering into significant contracts, and suppliers might offer better terms if they’re confident in your financial position.
• Planning for future growth becomes easier with audited accounts. If you’re considering raising investment, acquiring other businesses, or eventually selling, having a track record of audited accounts makes the process much smoother.

The audit process also forces good financial discipline. Preparing for an audit means maintaining proper records, reconciling accounts regularly, and staying on top of your financial position throughout the year.

Simpler Reporting Requirements

Companies moving to smaller categories will also benefit from reduced reporting requirements:

• Micro-entities can prepare very simple accounts under FRS 105, which requires minimal disclosure compared to full company accounts.
• Small companies can prepare simpler accounts under UK GAAP (FRS 102 Section 1A) and are exempt from preparing a strategic report, saving time and professional fees.
• Medium-sized companies (those dropping from large company status) will no longer need to include Section 172(1) statements, or other large-company disclosures such as future developments, employee and supplier engagement, and detailed financial instrument notes.

These simplifications aren’t just about reducing compliance costs – they also mean less time spent on paperwork and more time focusing on actually running your business.

Why This Helps Business Growth

The threshold increase removes a problem that has been holding back growth for years. 

Previously, businesses getting close to the £10.2 million turnover threshold sometimes deliberately held back expansion to avoid triggering medium company status and expensive audit requirements.

With the new £15 million threshold, you’ve got much more room to grow without worrying about compliance barriers. This is particularly helpful given recent inflation – some businesses hit the old thresholds purely because of price increases, not real growth.

Planning for the Changes

If you think your company might benefit from the new thresholds, it’s worth checking where you stand and working out what the changes actually mean for you.

Review your accounts from the last two years and assess your position against both the old and new thresholds. Remember, you need to hit at least two of the three criteria to change categories.

Think about timing if you’re near the boundaries. The rules apply to financial years beginning on or after 6 April 2025, so companies with March year-ends will see the benefits sooner than those with December year-ends.

Consider whether you actually want audit exemption if you become eligible. Yes, you’ll save money by dropping the statutory audit, but consider whether you gain other benefits from the process – such as improved internal controls or compliance with lender requirements.

Getting Professional Help

The threshold changes create opportunities, but they also add complexity to year-end planning. Understanding exactly how the rules apply to your business – particularly if you’re close to the thresholds or part of a group – requires careful analysis.

At Double Point, we help businesses understand how these changes affect their reporting requirements and compliance costs. We can review your current position, explain what the new thresholds mean for your company, and help you decide whether continuing with audits makes sense for your specific situation.

Whether you’re looking to take advantage of audit exemption, simplify your reporting requirements, or just understand what these changes mean for your business, we’re here to help.

If you think your company might benefit from the new size thresholds, contact us today. We’ll review your situation and help you understand exactly what the changes mean for your compliance requirements and costs.