News

The government has recently made some significant updates to the rules around company accounts and reporting.  These changes come into effect from 6 April 2025, following the introduction of The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024.

The good news is that many businesses will benefit from simpler reporting requirements and potentially reduced costs.  Here is a practical summary of what is changing and what it might mean for your business.

The new company size thresholds
The most significant change is an increase in the financial thresholds that define whether a company is classed as micro, small, or medium-sized.  These thresholds are being raised to reflect inflation and to make reporting simpler.

From 6 April 2025, if your company meets any two of the following three criteria, you’ll fall into one of the new size categories:

Monetary thresholds for group entities are also set to rise, with the following being applicable for parent companies:

The outcome is that many businesses will move into a smaller category, reducing their reporting obligations.

What does this mean to you? 
The government estimates that around 133,000 companies will benefit from these changes.  Here is how your reporting might be affected depending on your new company size:

• Micro-entities: You will no longer need to produce a Directors’ Report, making your annual reporting much more straightforward.
• Small entities: You may be exempt from statutory audit (unless part of a group requiring audit), helping you to save on audit costs and time.  You will also no longer need to prepare a strategic report.
• Medium-sized entities: Some of the more detailed disclosures previously required in the Strategic Report (such as detailed performance metrics and governance information) will no longer be necessary.

In short, these changes are designed to reduce administrative burdens, simplify your reporting, and lower compliance costs.

How to apply the new thresholds?
For companies whose accounting period starts on or after 6 April 2025, you can assume the new thresholds applied in the previous year when determining your size category.

For example:  If your year-end is 31 July, you will first apply the new thresholds for the financial year ending 31 July 2026. You can then apply the new thresholds retrospectively to determine if you meet the size tests for two consecutive years (which is often required when assessing eligibility for certain exemptions).

Changes to Directors’ Reports
For medium and large companies, several older disclosure requirements in the Directors’ Report are being removed. These changes reflect the fact that some of this information is now reported elsewhere, or is no longer considered helpful to readers of the accounts. The following disclosures will no longer be needed in the Directors’ Report:

• Financial instruments: Previously required commentary on financial instruments is now covered in the financial statements.
• Research and Development (R&D): R&D disclosures will instead form part of the Strategic Report.
• Likely future developments: This will now be covered within the Strategic Report’s business model and future outlook sections.
• Overseas branches: Disclosure of overseas branches is no longer required, as this information offers limited value and subsidiaries typically have their own reporting obligations.
• You can read the full details of the changes here: Legislation Document

If you are unsure how these changes will impact your company’s reporting or audit requirements, please contact us.  We are here to help you navigate the new rules and ensure you remain compliant while taking advantage of any available exemptions.