The upcoming changes to UK company size limits, taking effect in April 2025, represent a significant shift for businesses managing auditing and regulatory requirements, particularly those considering applying for audit exemption. Understanding these updates is essential for business owners and decision-makers, to ensure compliance and avoid complications.
What has changed?
The UK government has revised the company size limits, affecting qualification for company and limited liability partnership status across all sizes and audit exemption eligibility. These changes impact turnover, gross assets total (referred to in the legislation as balance sheet total) and employee numbers, which we summarise in the table below:
| Company size |
Criterion |
New threshold |
Previous threshold |
| Micro |
Turnover not more than: |
£1 million |
£632k |
| |
Balance sheet total not more than: |
£500k |
£316k |
| |
Employees not more than: |
10 |
10 |
| Small |
Turnover not more than: |
£15 million |
£10.2 million |
| |
Balance sheet total not more than: |
£7.5 million |
£5.1 million |
| |
Employees not more than: |
50 |
50 |
| Medium |
Turnover not more than: |
£54 million |
£36 million |
| |
Balance sheet total not more than: |
£27 million |
£18 million |
| |
Employees not more than: |
250 |
250 |
For businesses that previously qualified under the old limits, these updated thresholds, effective for accounting periods commencing on or after 5 April 2025, may alter compliance requirements. Companies must assess eligibility annually, as thresholds must be met for two consecutive years unless it is the first year of operation.
Impact on audit exemption
The updated UK company size limits directly affect audit exemption criteria. Businesses below these limits can apply for exemption from statutory audit, provided they meet other criteria, such as not being part of a larger group or falling into an excluded category like financial services and included within section 384 of the Companies Act 2006.
Audit exemption can save time and resources but managing the new regulations can be complex. Companies must evaluate group structures, intercompany trade and other factors accurately.
Key considerations for businesses
- Review your status: Ensure your business meets the updated UK company size limits and qualifies for audit exemption.
- Understand group dynamics: If part of a larger group, apply the new limits to consolidated figures, considering intergroup eliminations. Different thresholds, before any consolidation adjustments have been made, are not replicated in the above table.
- Assess exclusions: Certain industries, such as banking, remain ineligible regardless of size.
Clear record-keeping and transparent reporting are vital to demonstrate compliance.
Managing changes to UK company size limits and understanding their implications can be complex.
Contact us today to learn how we can support your business.
Further information on the new thresholds is available on the government’s website.