Changes expected to company size criteria
The changes in company size thresholds first introduced by the Conservative government are expected to come into force on 6 April 2025. This will mean some companies will fall out of the compulsory audit regime, and no longer must prepare strategic reports and cash flow statements. More companies will be able to prepare their accounts using the simpler, disclosure-minimal micro-entity reporting standards (FRS 105).
Note, there are no changes to the employee number thresholds. Only the monetary thresholds are changing.
What are the changes?
The size thresholds are expected to be as follows:
| Threshold | Micro | Small | Medium | Large |
| Prepare accounts under: | FRS 105 | FRS 102 (Section 1A) | FRS 102 | FRS 102 |
| Audit? | Not required | Not required | Compulsory | Compulsory |
| Turnover | Up to £1m (previously £632,000) | Up to £15m (previously £10.2m) | Up to £36m (no change) | Over £36m (no change) |
| Gross Assets | Up to £500,000 (previously £316,000) | Up to £7.5m (previously £5.1m) | Up to £18m (no change) | Over £18m (no change) |
| Employee Numbers | Up to 10 (no change) | Up to 50 (no change) | Up to 250 (no change) | Over 250 (no change) |
In order to ascertain what accounting standards companies are able to prepare their accounts under, companies have to meet two out of the three size thresholds in two consecutive years.
Please be aware, there are complexities with companies within groups, who need to consider the size of the group as a whole, as well as the stand-alone company size to determine audit requirements.
Changes to FRS 102
Please be aware, that there are significant changes to how leases are accounted for under FRS 102 for periods beginning on or after 1 January 2026. This will stop the distinction between operating leases and finance leases, and bring many leased assets onto the balance sheet, where previously there were simply expensed. Only short-term and low value assets will remain ‘off balance sheet’. This will increase the gross assets for many small and medium sized entities, and could therefore impact the accounting standards available to them.
There are no changes for lease accounting for micro-entities.
Should I still have an audit if it is no longer required?
If you are one of the company’s that will be moving out of the audit regime, company’s can still voluntarily have an audit of their financial statements.
Get in touch
For more information on the changes to company size thresholds, or to discuss the benefits of an audit, please contact one of our directors at info@wtca.co.uk.
Our team of tax investigation accountants is also available to assist with compliance, tax planning, and audit requirements, ensuring your business is fully prepared for the upcoming changes.