Changes to company size thresholds in the UK

Overview of changes

On 10 December 2024 the UK Government laid The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024, which will take effect on 6 April 2025.

This Statutory Instrument uplifts the micro, small and medium company size thresholds, as well as removing several reporting requirements from the Directors’ Report. The changes apply to companies incorporated under the Companies Act 2006, as well as limited liability partnerships (LLPs).

New size thresholds for individual companies and LLPs

The updated size thresholds for micro, small, medium, and large entities are as follows:

New size thresholds for group entities

For parent companies, the following group thresholds will apply:

There are no changes to the ineligibility criteria (such as a public company being prohibited from qualifying as a micro, small or medium company) included in sections 384B, 384 and 467 of the Companies Act 2006 for micro, small and medium entities respectively. 

Application of thresholds

The uplifted size thresholds apply for periods beginning on or after 6 April 2025. However, entities may apply the size thresholds, in relation to both the current and previous financial years for their first set of financial statements beginning after 6 April 2025. For example – when a company has a 30 June year end, it cannot use the new size thresholds to calculate its size for the year ended 30 June 2025.

This is because the accounting period began prior to 6 April 2025. However, it will be able to use the new thresholds for the year ended 30 June 2026. It will then be able to apply the new size thresholds to previous years, in order to calculate whether it meets the relevant size criteria for two years in a row.

Impact on companies

The increase in size thresholds will allow an increased amount of companies to qualify as small or micro. This will allow them to avail of reduced disclosures in their financial statements by adopting provisions of the small or micro companies’ regimes and may be able to avail of audit and consolidation exemptions available where entities previously did not qualify.

It is estimated around 113,000 entities will now be eligible to move to the micro entities category from small, around 14,000 to move to the small category from medium, and around 6,000 to medium from large.

Changes to narrative reporting requirements

In addition to the changes to company size thresholds, some narrative reporting requirements have been removed, applying to periods beginning on or after 6 April 2025. From that date, there will be no requirement for entities with more than 250 employees to disclose their policies and procedures in respect of the recruitment, employment and career development of disabled persons.

There will also be no requirement for companies to include information around risks relating to financial instruments, research & development expenses, post balance sheet events and their engagement with employees, suppliers, customers and others. These disclosures have been removed to prevent duplication of information within the Strategic and Directors’ Reports.

For example, if risks relating to financial instruments are material, then they should already be included as part of principal risks & uncertainties disclosure, and material post balance sheet events and future developments would already be discussed in the business review.

Some of these disclosures may still need to be included in the notes to the financial statements where accounting frameworks require such information.

SECR disclosures

Streamlined Energy & Carbon Reporting (SECR) disclosures are aligned to the current large size thresholds, meaning only companies qualifying as large under the existing thresholds are required to provide such information.

It should be noted that these thresholds are not being changed, meaning that there may be some companies, despite now being eligible to qualify as medium, will need to continue to present these particular disclosures in the Directors’ Report.

Summary

The amendments to company size thresholds and reporting requirements aim to simplify compliance and reduce administrative burdens. For further information, and to find out how Grant Thornton (NI) LLP can assist you in navigating these changes, please contact Louise Kelly, Partner.